Greece - debt/strikes

Greek workers protest against austerity measures

Article published on the 2009-12-17 Latest update 2009-12-17 14:31 TU

Greek Prime Minister Georgos Papandreou delivers his austerity package on Monday
(Photo: Reuters/John Kolesidis)

Workers in Greece went on a national strike on Thursday to protest against the government’s plans to impose austerity measures that will ease the crippling financial problems facing the country.

Thousands of schoolteachers, state hospital doctors, dockworkers and journalists went on strike, although two big unions led by allies of the governing socialist Pasok party have not joined .

Around 500 protesters set off on a demonstration in the capital Athens which was expected to number in the thousands by the time it reached the Parliament building in the city centre, the scene of recent riots.

The strike, which was expected to spread to around 60 towns and cities, came three days after Georgos Papandreou under acute pressure from financial markets, outlined a crisis strategy to curb public-sector hiring, reduce civil servant benefits and overhaul the tax administration.

The measures follow a debt crisis which is threatening Greece’s credibility within the financial markets as well as the European Unon’s eurozone, whose cohesion is now seen to be under threat.

Greece's public deficit is set to rise to 12.7 per cent of output this year, far above the eurozone limit of 3.0 per cent. Debt, now at 300 billion euros, is also expected to come to 113 per cent of gross domestic product in 2009 against an EU target of 60 per cent.

"Greece has got there in a long and painstaking process," says correspondent John Psaropoulos, "beginning in the early 1980s when the Socialist Party first came to power and began a policy of social welfare safety nets which led to deficits, especially after 1985.

"The policies were never rolled back by conservatives or by successive Socialist governments and the most troubling aspect of this is that the economy was never stimulated enough and liberalised enough to make good the expenditures."

On Wednesday, the ratings agency Standard and Poor's (SP) lowered Greece's long-term credit rating to BBB-plus from A-minus. It warned it could issue a further downgrade unless the government managed to get its finances in order.

The BBB-plus rating is still considered investment-grade but is below the European Central Bank's standard lending requirements.

SP said Greece's cost-cutting plans "are unlikely, on their own, to lead to a sustainable reduction in the public debt burden".

Reforms to cut public spending face "domestic obstacles that would likely require sustained efforts over a number of years to overcome.”

Another credit rating agency, Fitch, downgraded Greece to BBB-plus from A-minus last week.

Finance Minister Georgos Papaconstantinou, on a crucial tour of leading European capitals to rally support for Greece from governments, was meeting British counterpart Alistair Darling in London before going on to Frankfurt.

"We are starting off with a huge credibility deficit and there's not much we can do to change it immediately," Papaconstantinou said in an interview with the Financial Times.

"Our big concern is how we buy some time. The kinds of things we've started doing are a significant departure from the past, but they don't produce results right away."

Despite the protests, Papaconstantinou said the country stood behind the government's plans.

"We have a very clear sense that a majority of the population back this."