Greece Revolts

Update: There are increasing signs Greece will not be able to comply with the draconian austerity polices demanded by the EU. Several EU members--notably Germany, Holland and Finland--are expressing doubts that Greece should remain in the union. Meetings last week were abruptly cancelled amid spiraling distrust between Athens and creditors. Their skepticism is based on Greece's poor record of compliance with previous loan conditions. It promised to raise €50bn through privatization but that pledge has largely been ignored by a government riven with partisan infighting and politicians focused on the next election. Millions in taxes remain uncollected. One Greek minister said the country's economic and social system is exhausted. There is still no clear commitment from Greek coalition leaders about how the country will close a €325m funding gap. Antonis Samaras leader of the center-right refused to guarantee in writing that a deal cannot be revised following the April elections which enraged German policy makers. Bitter Greeks shot back by reminding EU leaders that Greece is the cradle of European civilization and nobody could eject it from its home. The EU is better financially prepared to absorb the shock of a Greek default and devolution two years into the sovereign debt crisis. Greece is sinking, its economy shrunk by 7% in the last quarter of 2011, so it may be wiser to cut it free. Going back to the drachma will be painful for Greeks like an addict going strait*. But once the pain subsides, Greece can rebuild its economy on an honest footing without having to go hat in hand to foreign creditors. Northern patience is running out as the deadline of 20 March approaches when €14.5bn in debt comes due.

{13.02.12}After their parliament voted to impose yet more economic sacrifice (199-74 in favor) on those they supposedly represent in favor of the new European aristocracy, Greeks took to the streets and engulfed the country in protests to express their disgust and displeasure with the European Union. Athens was the epicenter of revolt, but protests also reached the trendy havens of Corfu and Crete. At least 45 buildings in central Athens were burned out as demonstrators resorted to violence against the coalition government installed by EU leaders trying to cobble another round of draconian spending cuts to satisfy the demands of euro investors. The violence reached a peak Sunday night during which hundreds of protestors and security officers were injured. An estimated 80,000 people were in Athen's streets while 20,000 protested in the second city of Thessaloniki. A corps of black hooded anarchists called the Black Bloc movement took direct aim at police, as protesters looted and burned. One of the targets of the protester's wrath was an Athens underground cinema used by the Gestapo as a torture chamber during WWII.

Shares in Greek banks rose on the Monday opening, but the caretaker government faces an election by 2013. Voters are extremely unlikely to forgive politicians who voted for austerity measures after their minimum wage is cut from €751 to €600 a month, and their pensions and social services reduced. 150 thousand public sector jobs will be eliminated by 2015 with 15,000 cut this year. To add to voter grievances, the Greek economy is in recession with inflation and unemployment at 20%. Many in the middle class are falling into poverty. Despite the austerity measures it is still not clear whether the bailout money, which Germany will not allow to be paid until March, will be enough to bring Greece's debt load below 120% of GDP considered to be the maximum by international creditors. Currently the ratio is about 160%. Also, the bailout depends on the willingness of investors to swap their bonds for new ones at half their face value; many investors will not want to make a decision until new emergency funds are released by the EU. It is a crisis with a lot of moving parts, and the whole country could crash before it is put back together. As the head of a public sector union told Reuters, "The social explosion will come one way or another, there is nothing they [the politicians] can do about it any more." The biggest police union issued a statement saying there were limits to its tolerance for action against "our parents, our brothers, our children."

*Portugal, one of the so-called PIIGS, accepted economic austerity imposed by the EU and IMF, but it is finding out that the program is not working. Portugal is going deeper into debt. When it received the bailout money of $103 billion in May its debt to GDP ratio was 107%, by next year it is expected to rise to 118%. Like Greece, Portugal's economy is shrinking in a vicious circle of tight money and economic recession. Without growth, debt becomes nearly impossible to pay off without renegotiation of terms. Economic growth has depended to large extent on government spending and easy credit. So despite cutting Portugal's budget deficit by a third through spending and wage cuts, pension reductions and tax increases, the economy is expected to contract by 3% this year. On Saturday 100,000 people peacefully assembled in Lisbon's Palace Square to express their opposition to austerity measures and 13% unemployment. No riots yet, but dissatisfaction is growing as more unpopular measures are imposed.