Greece faces more strikes as PM plans more cuts

 

Greece's biggest public sector union called a strike for March 16 to protest new austerity measures expected within days as the price for securing support from European leaders for any debt rescue deal.

Prime Minister George Papandreou is under pressure to meet European Union demands to identify up to 4.8 billion euros (4.35 billion pounds) in additional savings before he visits Germany on Friday, and has called a cabinet meeting for Wednesday.

Government sources said on Tuesday he was looking at measures such as raising VAT, increasing duty on fuel and cutting public sector pay and that he could reach a decision following a meeting with members of his PASOK party at 3 p.m. British time.

"No one knows what the prime minister will decide to do in the end and exactly when he will make announcements" a senior government official told Reuters on condition of anonymity.

More than half of Greeks approve of the government's plans to tackle a crippling 272 billion euro debt pile, but the ADEDY public sector union said it would continue to oppose the proposed cutbacks on several fronts.

"The EU and the government need to understand that we will keep taking to the streets until we topple the unfair and anti-social measures which burden the poor without solving our economy's problem" ADEDY Vice President Illias Vrettakos told Reuters after announcing its 24 hour strike on March 16.

Together with its sister private sector union GSEE, ADEDY represents about 2.5 million workers or half of Greece's workforce.

Taxi drivers facing higher taxes meanwhile brought traffic to a halt in Athens, converging on parliament in their yellow cabs along with marchers demanding "no more sacrifices to help the rich" and "those who devoured the money should pay." 

EU Economic Affairs Commissioner Olli Rehn on Monday called for more measures to rein in a deficit that has prompted concern about Greece's ability to service its debt and shaken confidence in the euro zone and its single currency.

Greece's budget deficit hit 12.7 percent of gross domestic product in 2009 and the government has pledged to bring it down to 8.7 percent this year and below the European Union's 3 percent ceiling by 2012. Overall public debt last year rose to 272 billion euros, compared to GDP of 240 billion euros.

Nevertheless, the premium investors demand to buy Greek government bonds rather than German Bunds fell on Tuesday to the lowest level since mid-February. The cost of protecting Greek government debt against default also fell as markets bet the EU would aid Athens if need be.

GERMAN ANGST

Papandreou, who has said Wednesday's cabinet meeting would "take decisions on the economy," travels to Germany on March 5 to meet Chancellor Angela Merkel and will need to arrive offering fresh budget measures if he is to win more concrete support from the euro zone's biggest member state.

Merkel is facing strong domestic opposition to any bailout, particularly after it emerged that Greece had been filing inaccurate economic statistics. Germany is also taking moves to ensure money from any support package does not end up in the pockets of speculators.

German Foreign Minister Guido Westerwelle said on Tuesday he regarded talk about financial aid as inappropriate for now and called on Greece to "complete its homework."

Greek Finance Minister George Papaconstantinou said on Monday that the government would do whatever it took to meet its budget targets this year while Labour Minister Andreas Loverdos said he had proposed a pension freeze.

Representatives from ratings agency Standard & Poor's, which has warned it might downgrade Greece's BBB+ rating within a month, were in Athens to meet government officials on Tuesday.

The view of ratings agencies could determine Greece's ability to raise funds in the markets and the future of its banks, because under current rules further downgrades would result in the European Central Bank rejecting Greek debt as collateral for its lending operations.