Greece: Deal Reached; More Riots Expected

By Michael Bogan
Beacon Contributing Writer

Greece reached agreement to prevent bankruptcy of the small EU member, agreeing with the European Union (EU) and International Monetary Fund (IMF) to strict cuts in public spending, including pensions, government employee salaries and other cuts.

Greek Prime Minister George Papandreou said the government reached agreement to deep spending cuts in return for a euro45 billion ($60 billion) loan package from other members of the EU to fund Greece’s fiscal 2010 budget.

More than half of Greece’s population receives some form of benefit from the government budget.

“The measures we must take, which are economic measures, are necessary for our country’s protection, for our future, for us to be able to stand on our feet,” Papandreou said.

“The avoidance of bankruptcy is the national red line,” he said in a televised speech to the Cabinet. “I want to be clear to all. I have done and will do everything so the country does not go bankrupt.”

Under the plan, Greece will secure a loan from its euroland partners in the amount of euro30 billion at approximately 5 per cent over three years. The IMF is expected to add an additional euro15 billion loan at a similar or lower interest rate.

Recent deficit figures suggest that the Greek government is running fiscal deficits of 13.6%� per year, or more than twice the rate considered acceptable without devaluation, which is the typical outcome of many other countries’ currencies outside the protection of the eurozone. To make matters worse, the Greek economy is expected to contract 2 per cent this year.

Prior to the agreement, Greeks demonstration were commonplace, some relatively civil, others violent. Sunday’s agreement is expected to inflame an already angry citizenry into a frenzy of continued violence.

“We were expecting it to turn a bit ugly – and it has,” said Sky News Europe correspondent Alex Rossi, reporting from Greece.

Rossi said, “Things are going to get fairly tough here. These people are very, very angry with their government.”

Faced with a difficult decision, Papandreou pleaded with his people and Cabinet that the alternative to the EU/IMF agreement would be disastrous, most certainly bankruptcy.

“Economic reality has forced us to take very harsh decisions,” Papandreou said. “This is the only way we will finance our euro300 billion debt.”

Required or not, the agreement surely will invoke renewed and intensified violence, strikes and other forms of civil disobedience not seen in Greece in decades.

“To give you an idea of the seriousness of the situation, the Greek prime minister has described it as a matter of national emergency and he has even compared it to a war-time situation,” said Rossi.