Greeks’ elation at new debt relief is tempered by prospect of years of sacrifice
Greeks resigned themselves on Tuesday to a 130-billion-euro bailout that won their country a last-minute reprieve from bankruptcy at the price of a decade of austerity and humiliating foreign scrutiny of national finances.
YANNIS BEHRAKIS/REUTERS
ATHENS—Greeks were torn between relief and foreboding on the news Tuesday that their country has received a new massive bailout — while the aid will protect them from a calamitous default and keep them in the euro bloc, it will also cost households years of economic hardship.
The initial relief created Tuesday by the 17-nation eurozone’s approval of a new 130 billion euros ($170 billion U.S.) rescue package was offset by a grim reality: Greece faces many more years of sacrifice, on top of a tough 24 months of austerity measures that have contributed to record high unemployment and a rapidly contracting economy.
“I don’t see (the agreement) with any joy because again we’re being burdened with loans, loans, loans, with no end in sight,” Athens architect Valia Rokou said.
The deal in Brussels gives Greece its second financial lifeline in less than two years — a combined package of foreign loans equivalent to about 22,000 euros ($29,000) for every Greek citizen, children included. National debt already amounts to about 32,000 euros ($42,300) each.
The hope is that the aid will grant the country the breathing space to enact widespread reforms and set it back on a path to growth.
Finance Minister Evangelos Venizelos said the agreement managed to prevent a potential catastrophe.
“We avoided the nightmare scenario,” Venizelos said after returning to Athens following 15 hours of negotiations in Brussels. “We had a positive outcome, which, as I said in Brussels, was neither easy nor obvious.”
Venizelos insisted that the way forward now involved “work, work, work, systematic effort, collectivity, unity, consensus, responsibility” so that Greeks can pull their country out of the crisis that has threatened to pull down Europe’s single currency.
Greece has been surviving since May 2010 on a first 110 billion euros ($146 billion) batch of loans from the eurozone and the International Monetary Fund. That was not enough for the country to pay off its debts, however, and without more help the country faced defaulting on a bond repayment it could not afford next month.
Some in Athens noted that despite the gloomy future, the rescue deals lightened the immediate financial uncertainty looming over the country.
“Everyone was depressed ... This news gives me great joy,” said Christos Kontogeorgis, a pensioner.
As well as securing another deal with its European partners and the IMF, Greece is hoping to get its private creditors to agree a massive writedown in the holdings of their Greek debt. Banks, pension funds and other private investors are being asked to forgive some 107 billion euros ($142 billion) of the total 206 billion euros ($273 billion) in devalued Greek government bonds they hold.
Private bondholders will trade their bonds with new ones carrying much longer maturities and lower interest rates — an annual 2 per cent by 2015, 3 per cent to 2021 and 4.3 per cent after that.
“It’s not every day that 100 billion euros in public debt is written off, or loans for 130 billion euros agreed,” Ta Nea newspaper said in an editorial. “There will be new sacrifices and difficulties, particularly for middle and lower earners. We must hope that this new period will become an opportunity for growth and better prospects.”
The head of the conservative New Democracy party, the junior partner in Greece’s interim coalition government, said the deal buys Greece time and hope of recovery.
“Greece is in pain and the people is suffering, therefore this is no time for jubilation,” Antonis Samaras said during a visit to Cyprus.
Greece is in a fifth year of recession, with the economy forecast to shrink 4.5 per cent this year before starting to expand again in 2014 — although by then it will have contracted by more than 17 per cent since the beginning of the crisis in 2009. Unemployment is at 21 per cent, with one in two workers under 25 out of a job.
Majority Socialist leader George Papandreou urged Greeks “to continue the fight we have started, despite the huge price, and not abandon the effort halfway through.”
Without either aspect of Tuesday’s agreement, Greece would have soon been forced to default on its debts — halting pension and civil servant salary payments. In all likelihood, Greece would have had to leave the common European currency it joined in 2001.
“I feel relieved to start with, because my country has escaped the immediate danger it faced,” said Athens lawyer George Sabalos, 40. “But I’m also troubled by our partners’ demand that the country’s constitution should be modified as part of the guarantees they are seeking, because I believe that is a rather excessive demand that goes against the principle of solidarity.”
Greece has agreed to change its constitution, to give priority to debt servicing payments that will be put directly every quarter into a segregated account.
The country’s unions fiercely oppose further austerity measures that accompany the second bailout, and have called a protest rally outside Parliament in central Athens on Wednesday.
Prime Minister Lucas Papademos has called a cabinet meeting to discuss the additional cutbacks, which will be included in emergency legislation to be tabled later Tuesday. The draft law will force private sector employees to accept further salary cuts as a result of the minimum €751 ($996) monthly wage being cut by 22 per cent, and further cut pensions.
“Workers in our country refuse to accept the barbarity of the tougher neoliberal measures that have been extortionately imposed by our creditors, and that is why they will continue and step up their struggle ... to block the destruction of our society,” the main GSEE private sector union said in a statement Monday.
GSEE and its public sector counterpart, the ADEDY, have staged a series of general strikes over the past two years. Many have turned violent, and as Greek lawmakers debated new austerity measures on Feb. 12 extensive rioting saw dozens of businesses in central Athens burnt and looted.
Three workers died in an Athens bank torched by rioters during a protest in May 2010.
Greek stocks opened lower Tuesday, and were 3.5 per cent down shortly before closing. However, they’ve been enjoying big gains over recent weeks on the expectation that the bailout would be secured.
Greece is expected to hold national elections in April, after Papademos’ interim coalition fulfills its mandate by securing and implementing the twin bailout and debt relief agreement.
A new poll published Tuesday indicated that Samaras’ conservative party would come first in the vote, but without the majority needed to govern alone. The GPO poll for private Mega TV gave New Democracy 19.4 per cent, followed by the Socialists at 13.1, and the new Democratic Left party with 12. The Communist party would get 9.5 per cent, followed by the Syriza left coalition at 8.5 and the rightist LAOS — a former member of Papademos’ coalition — with 5.1 per cent.
Some 63 per cent of respondents said they would rather the elections led to a new coalition government.
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