Greek Government and Public at Odds Over New Cuts

Anastasia Kastaniotou, a struggling mother of three, stood near the Greek Parliament building on Wednesday and threw up her hands as she contemplated an €11.5 billion austerity package that her country’s government was trying to tie up this week to keep Greece in the euro.

Greek Parliament
Louisa Gouliamaki | AFP |Getty Images
Greek Parliament

Prime Minister Antonis Samaras has been scrambling to seal a deal with his coalition government for fresh cuts to pensions, salaries and other expenses before Greece’s so-called troika of international lenders returns to Athens on Friday to inspect his progress. The country’s next installment of bailout money will depend on his getting a passing grade.

But on the streets of Athens, there is a sense that this latest effort to placate Greece’s lenders may be a last straw for the public.

After two-and-a-half years of wrenching austerity, “they will not be able to get more money from us than they already have,” Mrs. Kastaniotou, 44, said as her three teenage daughters and husband nodded in agreement. “Mark my words,” she added. “In the coming months, there will be a revolution, and this government will fall.”

Greece had all but slipped from the radar screen during August, after financial markets went onto late-summer autopilot and troika inspectors from Brussels, Frankfurt and other North European cities headed off on their vacations.

But as investors start speculating once again on the euro’s future, this troubled country is returning to a central role in Europe’s long-running debt drama. And even as much of Europe awaits word Thursday on what steps the European Central Bank (explain this) may take next to try to insure there are no more Greek-style collapses, the Athens government is already in a critical care category beyond the help of any new E.C.B. remedies.

Few people here expect or even want Greece to exit the euro. But the country is once again running out of cash. It continues to depend on loans from the troika: the International Monetary Fund, the E.C.B. and the European Commission. And despite Greece’s teetering on the brink of bankruptcy, the troika has been withholding €31.5 billion, or $39.7 billion, pending a review of Greece’s efforts to make good on pledges to repay its loans.

A preliminary review is expected to be conducted next week, with a final report card due in early October. Should that report be negative, a fresh wave of financial troubles would wash over this country. The broader concern is that the ripples would spread to other troubled euro zone countries, including Spain and Italy, which are struggling against a crisis of confidence by financial markets. (It is primarily those two big economies that any E.C.B. action on Thursday or in coming weeks would be intended to protect.)

Mr. Samaras, citing his country’s deep recession (explain this), is pleading with Greece’s lenders to give the country a couple more years to implement the austerity measure that Athens had pledged as a condition of receiving its rescue, and to meet its promises to mend its tattered finances.

Many German politicians and citizens in particular are loath to grant Greece any extensions if it means European taxpayers would have to lend Greece even more money to cover the interest payments that would be incurred.

All of which is why Mr. Samaras wants to push through €11.5. billion in new budget cuts right now, as a way to persuade Greece’s lenders to resume dispensing money to Athens from the €130 billion bailout that Europe and the I.M.F. agreed to. That money has been held largely in suspension since a caretaker government was installed in May following inconclusive elections, and a second round of elections held in June resulted in Mr. Samara’s emergence as prime minister.

A leaked draft of the budget-cutting blueprint foresees fresh cuts to pensions and state spending in the health sector, defense and local government subsidies, as well as plans to push up to 40,000 civil servants out of the public sector by 2014, chiefly through forced retirement.

Still, Mr. Samaras faces a stiff challenge in pushing those measures through his shaky coalition government. The two junior partners, the Socialist leader Evangelos Venizelos and the moderate chief of the Democratic Left, Fotis Kouvelis, have misgivings about proposed additional cuts to pensions and civil servants’ salaries fearing the social unrest it would cause.

Those concerns are probably not unfounded. Even if the government can hold itself together, such unrest seems increasingly inevitable. After two and a half years of cutbacks, a fifth straight year of grinding recession, and a jobless rate that is now above 23 percent, many Greeks are livid at the prospect of more cuts.

Supreme Court Demonstrations

The public refrained from holding protests during the elections. But now that Mr. Samaras is trying to impose more cuts on average workers — but none on the oligarchs or on wealthy Greeks suspected of stashing their money in foreign accounts — many people have been taking to the streets in recent days, ahead of the troika’s visit.

On Wednesday, judges, public prosecutors and court workers demonstrated in front of Greece’s Supreme Court to protest a further round of pay cuts on top of 20 percent to 50 percent salary reductions already implemented over the last two years. Large swaths of the police force went on strike across the country last week, and firefighters and coast guard officials are to hold a march on Thursday.

Perhaps more dire, in the last few weeks, numerous Greeks have been obliged to pay for the health services after doctors and pharmacists stopped providing them on credit to protest debts owed to them by the state.

News reports that the troika may insist on further measures, like insisting that Greeks work a six-day week, have not cooled passions here, even though Greek officials have denied rumors that the European lenders would insist on an extended workweek and other labor market reforms.

As tension rises on the streets of Athens, Mr. Samaras and his energetic finance minister, Yannis Stournaras, have been conducting a charm offensive across Europe to persuade power brokers like the German chancellor, Angela Merkel, the French president, François Hollande, and a phalanx of influential bureaucrats in Brussels that Greece means to stick to its pledges.

Mr. Hollande has sounded an upbeat note, stating Tuesday that a Greek request for a two-year extension to its fiscal adjustment period could be granted if the troika issues a positive report on the country’s reform drive and as long as Greece does not ask its lenders for more money.

Late last month, Ms. Merkel also repeated her desire to see Greece remain in the euro, and admonished German officials who have been calling for Greece’s ouster to quiet down.

On Wednesday, the German finance minister, Wolfgang Schäuble, told German radio that speculation about a Greek exit from the euro was “not helpful.” Still, he struck a stern tone with Mr. Stournaras, who visited him in Berlin on Tuesday, saying Greece must focus on implementing the agreed-to reforms.

That message was underscored Wednesday by the prime minister of the Netherlands, which is grappling with its own government showdown over austerity measures. Prime Minister Mark Rutte said his country would refuse to contribute any further aid to Greece.