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Greek strike tests government's austerity mettle

Source: Reuters - Wed 10th Feb 2010

A strike by Greek civil servants grounded flights and shut many state schools and offices on Wednesday, in the first big test of the government's resolve to tackle a debt crisis which has shaken the euro zone.

Investors, rating agencies and EU policymakers are closely watching the 24-hour strike and the government's response.

They have said Greece, which is prone to violent street protests, will not get support for free and urged the government to be firm.

Hundreds of members of the ADEDY public sector union waving banners and beating drums marched through central Athens as riot police looked on, ahead of a demonstration planned for later in the day in front of parliament.

But the mood in the Greek capital remained calm.

Many public sector employees turned up for work in government ministries and schools, while ordinary Greeks on the streets said it was too soon to dismiss efforts by the socialist government to pull the country's finances back from the brink.

"Will these protests save the economy?" said Vassilis Bernalis, 58, a street vendor selling apples and bananas. "We have to help the government succeed in this and if it fails then we all have the right to protest. It would be unforgivable."

With EU leaders due to discuss Greece at a special economy summit in Brussels, financial markets rallied on Wednesday on hopes that the European Union would mount a bailout. The spread of Greek bonds to benchmark German Bunds tightened to its narrowest since January 20. 

The public sector strike comes a day after the socialist government announced fresh measures to further cut the public wage bill and hike taxes, defying unions with plans to save the state 800 million euros (700.5 million pounds) this year.

Unions oppose plans to freeze public wages, slash the salary supplements many Greeks get on top of their base pay, and replace only one in five people leaving the civil service. They say tax reforms, which are also part of the EU-backed plan to shore up Greece's finances, hurt the poor.

Weekend polls showed the majority of Greeks back the government's reform measures. The government also appeared to have faced down for the time being a separate protest by farmers blocking highways and a border crossing with Bulgaria, as the demonstration dwindled to the last few people on Wednesday.

While no violence was expected during Wednesday's stoppage, it was expected to be just the first in a series of union protests whose impact would depend on the success of the government's measures in restoring faith in Greece's economy.

ADEDY, which represents half a million workers, said on Tuesday it was likely to join a February 24 private sector strike or stage another strike in March.

Memories still linger of weeks of violent demonstrations in December 2008, fuelled by anger at unemployment and corruption.

"They had promised the rich would pay but instead they take the money from the poor" said Ilias Iliopoulos, ADEDY general secretary. "This is the policy we are fighting, not the effort to get out of the crisis."

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