Athens Pain

• February 14th, 2012
• Posted by EUEditor

The Greek Parliament yielded to heavy pressure from its European Union partners on Monday to vote in still more severe austerity measures in return for urgently needed, fresh loan guarantees.

The joint provision from the EU and International Monetary Fund, for €170-billion (A$208.42-billion; xe.com, 15.2.12), will service bonds coming due in the coming months.

The trade-off is a reduction in the minimum wage, to some €500 per month, with a general cut of 25% in average incomes.

Public anger and despair came out in fresh demonstrations during a 48-hour strike, with buildings in Athens again set on fire and several injuries both on the side of the protestors and riot police.

The vote, 199 to 74, saw government and opposition members lining up, as they said, to avert a worse “catastrophe” if they resorted to a national default on borrowing.

It was enough of a bipartisan act to satisfy outside interests, especially the German government, which, as a chief lender, has been pushing among the hardest for guarantees of iron management of the projected cost-cutting – and service reductions entailing the dismissal of thousands of public servants.

The European Commission also has been putting on the pressure  for reassurances that management practices will hold.

Olli Rehn, the Commissioner for Economic and Monetary Affairs, said the Eurozone group, countries using the Euro currency, needed a “clear and unequivocal commitment” by the Greek  parties.

“For Greece, for the Greek people, it is much better to show the necessary political determination in order to ensure that the program can be implemented …”, he said.

European Finance Ministers on Wednesday will be inspecting the terms of the Greek parliamentary vote, looking to approve the release of funds.

Greece was worst-affected of the smaller countries, and smaller economies, along with Ireland and Portugal, unable to sustain heavy state debt, since the global financial crisis of 2008.

The EU has put in place a succession of guarantee funds and last month enacted a new Treaty for closer collaboration, to share the management of financial crisis more effectively, See EUAustralia Online, “EU summit agrees on finance pact”, 31.1.12.

Major concern has focused on seeking whether the larger countries, beginning with Italy and Spain, will withstand the pressure of indebtedness on their budgets, or submit to a “domino effect” on loans.

Government leaders in Canberra said Australia would “feel the effects” of the crisis in Greece, and its economic impacts elsewhere in  Europe.

“Whatever happens it will be a very long and painful adjustment in that country”, said the Treasurer, Wayne Swan.

The Prime Minister, Julia Gillard, told the House of Representatives (13.2.12), the decision of the Greek parliament meant a “long journey of recovery for Greece, but it was necessary.”

Reference

Tony Czuczka and Rainer Buergin, “Germany Welcomes Greek Parliament Vote for More Austerity”, Bloomberg, NY, 13.2.12.
http://www.bloomberg.com/news/2012-02-13/germany-welcomes-greek-parliament-vote-for-more-austerity.html, (13.2.12).

Simon Taylor, “Greek MPs approve austerity package”, European Voice, Brussels, 13.2.12. http://www.europeanvoice.com/article/2012/february/greek-mps-approve-austerity-package-despite-protests/73577.aspx, (13.2.12).

Ian Wishart, “Commission warns Greece over lack of consensus”, European Voice, Brussels, 13.2.12.
http://www.europeanvoice.com/article/2012/february/commission-warns-greece-over-lack-of-consensus/73578.aspx, (13.2.12).

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