Greece Back in Crisis on TV Shutdown, Downgrade

Greek main opposition party leader Alexis Tsipras (C) talks with employees of the ERT public broadcaster to express his support at the headquarters studio in Athens on June 11, 2013.
Louisa Gouliamaki | AFP | Getty Images
Greek main opposition party leader Alexis Tsipras (C) talks with employees of the ERT public broadcaster to express his support at the headquarters studio in Athens on June 11, 2013.

Greece's fragile government faced an internal revolt and fierce public protest on Wednesday over the sudden closure of state broadcaster ERT, hours after the humiliation of seeing its bourse downgraded to emerging market status.

The twin setbacks, coupled with the derailing of a troubled privatization program, blew a hole in rising investor confidence that had prompted Prime Minister Antonis Samaras to declare the risk of a "Grexit" from the euro was dead and a "Greekovery" was under way.

Yields on Greece's 10-year benchmark bond crept back above 10 percent after Athens failed to sell state gas firm DEPA on Monday, leaving it short of cash to meet its international bailout targets.

Read more: (For Hard-Hit Greeks, IMF Mea Culpa Comes Too Late)

The stock market traded at two-month lows after Greece became the first developed nation ever to be lowered to emerging market by equity index provider MSCI.

Prime Minister Antonis Samaras's government declined comment on the market reclassification as it tried to fend off a growing media backlash against ERT's dramatic closure.

The public broadcaster was yanked off air just hours after the shutdown was announced in what the government said was a temporary measure to staunch an "incredible waste" of taxpayers' money prior to relaunching a slimmed-down station.

Labour unions called a 24-hour national work stoppage for Thursday and journalists went on an open-ended strike, forcing a news blackout on privately owned television and newspapers.

"The strike will only end when the government takes back this coup d'etat which gags information," the journalists' union said.

Some ERT journalists were occupying the broadcaster's building in defiance of police orders and broadcasting over the Internet. Hundreds of employees and protesters gathered outside.


MSCI said the Athens bourse did not reflect improved practices in developed markets for securities borrowing, lending facilities, short selling and transferability of shares. It had not met the developed market criteria for size for two years.

Still, brokers said more money may ended up invested in Greek stocks over the medium term due to the country's weighting in emerging market indices, since its exposure in developed markets global indices was marginal.

(Read more: Greece awakens from coma but recovery likely to beanaemic)

"The debt crisis in the last three years hit all triggers, prompting developed market funds to reduce their exposure," said Theodore Krintas, head of wealth management at Attica Bank.

"Emerging market funds could not enter since Greece was classified as developed market, now it will be on their radar."

Analysts said the outcry over the state broadcaster posed a more immediate threat to the government, even though ERT's three statewide channels have a combined audience share of barely 13 percent. About 2,000 of its 2,600 employees are non-journalists.

The government promised to relaunch a slimmed-down version of ERT within weeks, saying it only took ERT off air so suddenly due to fears that workers would damage state equipment.

"We didn't shut down ERT, we temporarily suspended its operations to fix it and make it work on a healthy basis," government spokesman Simos Kedikoglou told Reuters.

The shutdown was decided six weeks ago and was unrelated to the failure to sell DEPA or to an ongoing inspection visit by EU and IMF lenders in Athens, he said. Greece is under pressure to cut the public sector workforce and sack some civil servants.

The European Commission said it did not seek ERT's closure under the bailout programme but did not question the decision either. France's Socialist government voiced outright condemnation.

(Read more: Will China Buy Up Greece's Best Assets?)

"This is obviously very worrying and regrettable. One can only deplore this decision by the Greek authorities," Culture and Communications Minister Aurelie Filipetti said.

"Austerity must not strike at pluralism of information and of television. Public broadcasting services are necessary in a democracy so I deeply regret this decision."

Indefinite Strike

Many Greeks have little love for ERT journalists and the state broadcaster is often cited as an example of inefficiency, overspending and jobs given in return for political favours.

But the speed and suddenness of the shutdown - ERT screens abruptly went black just before midnight - stunned Greeks long used to the slow pace of public sector restructuring.

"This government's ways are dictatorial: they decide and they order," said 45-year old Panagiotis, who declined to give his full name for fear of losing his own public sector job.

"It was a wrong move. Yes, the public sector needs to be downsized and we all knew that ERT was being used for political favours but they did not need to fire them all."

The closure opened cracks in Samaras's fragile three-party coalition. Samaras's two junior partners, the Socialist PASOK and the Democratic Left said they would oppose the decision.

Read more: (Man Who Coined 'Grexit' Says Not Much Has Changed)

Both parties said they had not been consulted but stopped short of saying the row could bring the government down.

However, political analyst Theodore Couloumbis of the ELIAMEP think-tank said it might trigger an early election.

"It could be highly destabilizing if it moves to a confrontation in parliament where the two smaller political parties have to humble themselves to avoid a next election or stick to it and force a next election," he said.

"It's anyone's guess what would happen in elections now and what impact it would have on the economy at a time when a so-called Greekovery is visible on the distant horizon."

The decision was taken by ministerial decree, meaning that it can be implemented without immediate reference to parliament. But the communist opposition said it would put a legislative amendment to parliament on Wednesday to annul the decision.

Opposition leader Alexis Tsipras was to meet State President Karolos Papoulias to protest against the decision. On Tuesday, he called the closure "a coup, not only against ERT workers but against the Greek people", and accused the government of the "historic responsibility of gagging state TV".

(Read More: Out With 'Grexit,' in With 'Greecovery')