September 21, 2011 – By Renee Maltezou and Lefteris Papadimas
Continue Reading Below
ATHENS (Reuters) - Greece said it will announce a plan on Wednesday to bring forward austerity measures agreed under its bailout program, mostly in the form of spending cuts, to secure a fresh injection of aid and save the country from an October bankruptcy.
But with public anger high over a belt-tightening campaign that is driving the country into a fourth year of recession, the powerful labor unions vowed to oppose the measures with two 24-hour strikes.
Financial markets are almost certain Greece will default, an event economists and politicians fear could send global markets tumbling and push other vulnerable euro zone members like Italy and Spain over the edge, potentially splitting the currency area.
But they see little chance that the so-called "troika" of advisers from the European Union and International Monetary Fund will deny Athens its next aid tranche before the euro zone strengthens its EFSF safety net designed to limit contagion.
After the troika made clear it was losing patience over the failure by Athens to meet fiscal targets laid out in its bailout program, Finance Minister Evangelos Venizelos promised in a Tuesday conference call that he would front-load the measures.
Continue Reading Below
"We are doing and will do whatever it takes. We won't put the country's fate at risk," Venizelos told parliament before a cabinet meeting at which he was expected to present proposals.
The troika agreed to return to Athens early next week to continue talks on an 8 billion euro aid tranche expected in October. Earlier this month the inspectors abruptly left Greece in a row over budget slippage and corrective steps.
Greek media reported the measures likely to be brought forward included accelerated public sector layoffs, pension and wage cuts for civil servants, a hike in heating fuel tax and an extension of an already announced one-off property tax.
Venizelos gave no details but said there was little room to raise revenues, an indication he would not push for further tax hikes in addition to a set of unpopular property and wage taxes imposed since June.
He said that without the troika's supervision, Greece would have "derailed fiscally" but criticized European leaders for a slow and disorganized approach to the crisis.
"As an institutional system that manages a common currency exposed to speculative attacks from international markets, Europe cannot manage this crisis with the decisiveness and speed and effectiveness it needs," he said.
A government spokesman said the cabinet would make an announcement later in the afternoon.
AUSTERITY STEPPED UP
Under Greece's so-called mid-term plan, it has agreed to cut its fiscal gap to 1.2 percent of gross domestic product by 2015, from an estimated 8.5 percent or more this year, to help pay off debt expected to exceed 165 percent of annual output.
While the government needs the loan tranche to avoid running out of cash next month, Greece's two biggest unions, representing some 2.5 million workers, vowed to strike for two days on October 5 and October 19 to protest any new cost cuts.
"We will fight to the end, to topple this policy," Ilias Iliopoulos, general Secretary of public sector union ADEDY, told Reuters on Wednesday.
"The troika (EU and IMF) and the government must go."
It was the first big nationwide protest announced since early summer, when daily demonstrations culminated in violent clashes after weeks of unrest.
The country remains bitterly divided between private sector workers who say a bloated state bureaucracy is strangling Greeks and public servants who say the biggest problems are political corruption and tax evasion.
Under pressure to cut the size of the public sector, the government said it had sacked some 40,000 out of 75,000 contract workers over the last year and saved 300 million euros. That is far short of a pledge to cut the 725,000 public workforce by a fifth by 2015.
The new taxes, plus job and pension cuts, have helped push youth unemployment to 40 percent and hammered small business owners. Some 800 demonstrators rallied in central Athens on Wednesday to protest against new public layoffs.
"Yes, maybe we lived a life bigger than we could afford. And we wouldn't object to these sacrifices if we knew they would get us somewhere. But there is no way out," said public sector worker Fragoulis Krokos, 47. "There is no end to this slide. If I could, I would leave the country now."
The conservative opposition, which has a slim lead over Prime Minister George Papandreou's Socialists in opinion polls and has called for snap elections, maintained its refusal to cooperate with the government, which has irked EU leaders.
"The storm of new measures, which will hit the whole of Greek society and sink the economy deeper in recession, clearly proves the resounding failure of the economic policy that has been implemented until today," the center-right New Democracy party said in a statement.
(Additional reporting by Ingrid Melander and Harry Papachristou; Writing by Michael Winfrey; Editing by Michael Roddy and Paul Taylor)