YOU ARE HERE: LAT HomeCollections

Greece braces for strike against spending cuts

Thousands of demonstrators are expected to protest austerity measures. Doubts about debt-stricken Greece's ability to meet deficit reduction targets have in turn spooked global financial markets.

October 05, 2011|By Anthee Carassava, Los Angeles Times
  • Greek high school students gather in front of parliament during a protest in Athens against education changes.
Greek high school students gather in front of parliament during a protest… (Alkis Konstantinidis /…)

Reporting from Athens — Assurances from the Greek government that it had enough cash to pay its bills through mid-November did little to calm global economic jitters Tuesday, as the debt-stricken country braced for a nationwide strike against the cuts in public spending that are the price of staving off default.

Thousands of demonstrators already staging rolling wildcat strikes and sit-ins at government buildings in Athens are expected to join forces Wednesday, spilling into the streets of the capital and other major cities to protest austerity measures that many say are causing pain without generating improvements.

The protests are raising further doubts about the Greek government's ability to impose the fiscal discipline required by its lenders. Uncertainty over whether the nation could meet its targets has spooked global financial markets, which fear a default could devastate European banks that hold Greek debt.

Investors were alarmed by the government's acknowledgment this week that Greece would miss its deficit reduction targets through 2012 despite radical spending cuts and billions of dollars in rescue funds cobbled together by its European peers and the International Monetary Fund.

"We're at the worst moment under the worst conditions," Finance Minister Evangelos Venizelos told reporters Tuesday. "We have to make a superhuman effort to win this wager of our times."

Still, he said, in a bid to soothe spooked investors and worried families, "there is no [cash flow] problem until mid-November. We have done a cash flow forecast and our estimates are secure."

Greek officials have been trying for weeks to convince a team of European and IMF debt inspectors that it can jump-start the anemic economy, meet ambitious fiscal targets and make enough progress on key structural reforms to secure an additional $11 billion in rescue loans that the country needs to stay afloat.

The socialist government last month unveiled new austerity measures with additional public-sector job cuts and pension reductions to try to secure the rescue funds and avoid a default. The measures included the termination of 30,000 state jobs by the end of the year through the closure of numerous state organizations, a lower threshold for paying income tax and a controversial property tax affecting Greece's 5 million homeowners.

International creditors suggested this week that they probably would disburse the rescue funds, but after November — two months later than initially planned — and only after Athens provides full proof of its creditworthiness.

A growing number of European countries, including economic powerhouse Germany, have become reluctant to keep financing Greece if it continues missing its fiscal targets.

It remained unclear whether European governments would pony up more funds, whether Athens would be left to either default on its more than $450-billion debt or benefit from seeing private bondholders take on greater losses than currently negotiated.

But with the financial crisis biting deeper into the economy, the unemployment rate surging above 16% and living costs rising because of multiple tax increases, more drastic government measures aimed at putting the country on a track to recovery could unleash public furor.

A stone-faced Venizelos said at a news conference in Athens that no matter what happened, Greece, the weakest of the 17 European nations using a single currency, "is and will always be in the Eurozone." Speculation continues that the nation's woes will force it out of the Eurozone.

"If we stick to our plan and meet our targets, we will be fine," Venizelos said. "If society and public sector managers, though, fail to act responsibly, then we may face problems further down the road."

Carassava is a special correspondent.

Los Angeles Times Articles