Published October 27, 2011
By Renee Maltezou and Daniel FlynnGreece vowed on Thursday to press ahead with economic reforms to capitalize on an EU deal to slash the country's debt, despite widespread anger among citizens at the prospect of years of painful belt-tightening demanded by foreign lenders.
In a bid to calm fears among Greece's 11 million people, Finance Minister Evangelos Venizelos promised there would not be further cuts to wages and pensions as a result of the agreement sealed in Brussels to halve the 200 billion euros of Greek debt in the hands of private bondholders.
The minister said that negotiations now needed to take place with banks to determine their participation in the bond swap to slash Greece's debt mountain, forecast to top 160 percent of gross domestic product (GDP) this year.
Prime Minister George Papandreou said the EU deal would help ease the burden on Greece's middle class and turn the page for the country, racked by its worst recession in four decades.
"We must continue to work intensively to change everything that offends us," Papandreou said in a televised address to the nation. "The crisis gives us the opportunity and the deal gives us the time to decide what is important for Greece."
But on the streets of Athens, Greeks tired of record unemployment and falling wages poured scorn on the EU bailout, saying that it heralded a long period of more austerity.
"What rescue? Europe has betrayed us. Can't they see we've nothing left to give?" said 85-year old George Kapsokalyvas, a public sector pensioner. "Only God can save us."
NOTHING TO CELEBRATE
Papandreou's Socialist party was reduced to just 153 members in the 300-seat parliament last week after expelling an MP who voted against labor reforms, raising expectations that further belt-tightening could trigger snap elections.
Papandreou acknowledged the deal might force Greece to temporarily nationalize some of its banks because of the writedown on their bond holdings. The chairman of Greece's sixth largest lender ATEbank, Theodoros Pantalakis, estimated Greek banks would need some 27 billion euros in fresh capital.
Without the reduction in its debt and the 130 billion euros in fresh EU/IMF funding under the Brussels agreement, Greece risked becoming the first euro zone country to go bankrupt -- sending shockwaves around global markets which threatened to swamp larger euro zone neighbors, such as Italy.
After the last-minute suspension of talks with inspectors from the EU/IMF troika in August sowed panic in financial markets, Venizelos said they would henceforth maintain a continuous presence in Greece to allow faster decision making.
The leader of the main conservative opposition party New Democracy, who has consistently refused to back Papandreou's efforts to tackle the crisis, condemned the government for relinquishing control over policy to international lenders.
"Our priority should be reestablishing economic growth...to regain our national sovereignty," said Antonis Samaras. "We have absolutely no right and no reason to give it up to anyone."
Samaras said there was nothing to celebrate in the agreement, which would reduce Greece's debt to 120 percent of GDP by 2020 -- the same level it stood at in 2009.
Ordinary Greeks also voiced resentment at the power wielded by the troika, which is demanding liberalization of Greece's highly regulated economy in return for the funds needed to stave off default.
"If these inspectors come here permanently, it will be an occupation without weapons," said Panagiotis Papadopoulos, 46, a worker at the state power corporation. "This government has succumbed."
(Additional reporting by Dina Kyriakidou, Lefteris Papadimas and Ingrid Melander in Athens and Harry Papachristou in Brussels; Writing by Daniel Flynn)