BL: Greek Strikes to Paralyze Athens as Papandreou's Deficit Drive Challenged
By Natalie Weeks and Maria Petrakis
Feb. 10 (Bloomberg) -- Prime Minister George Papandreou’s drive to get Greece’s ballooning budget under control is being challenged in the streets today as striking labor unions shut down schools, hospitals and flights.
Air-traffic controllers and civil-aviation workers are effectively closing down Greek airspace as part of the 24-hour work stoppage by ADEDY, the umbrella group representing about 600,000 civil servants. Some 483 international and domestic flights have been cancelled, a spokeswoman for Athens International Airport, Greece’s biggest, said by telephone.
Protests against Papandreou’s plans to freeze wages and reduce benefits come after European Union leaders, set to meet at a summit in Brussels tomorrow, signaled they may aid the country if progress in cutting the deficit is made. Bonds have slumped in Greece and in the euro area’s southern edge as investors examine budget shortfalls across the 16-nation bloc.
“The concern is whether the strike will be a one-off or the first of a long series of street demonstrations involving other parts of the economy,” said Giada Giani, an economist at Citigroup Global Markets in London. “We need to see a prolonged period of strikes before we know whether the government’s willingness will be affected.”
ADEDY opposes Papandreou’s program and plans to call out its workers again on Feb. 24, when the biggest private-sector group, GSEE, holds its own 24-hour strike. Today’s walkout, with rallies in Athens and other cities and towns, is organized labor’s first major challenge since the Oct. 4 election of Papandreou, a socialist whom unions backed in the vote.
Union Threats
“People are out expressing their rage,” said Yiannis Kelekis, 68, who said he gets a 470-euro ($646) monthly pension. “They are absolutely right. The people that caused this crisis are now asking for others to make sacrifices.”
Protesters marched through the center of rainy Athens carrying signs that read “No to the speculators” and “Overturn the Growth and Stability Pact.”
“Cutting public-sector salaries is an easy political choice,” Spyros Papaspyros, chairman of the ADEDY civil servants union, said this week. “Attacks that start on the public sector will lead to attacks on all.”
The unions are contesting measures demanded by the EU and investors to reduce a deficit of 12.7 percent of gross domestic product last year to within the EU’s 3 percent limit in 2012. Greece’s fiscal woes have stoked concerns that it may need a bailout and helped spark a rout in global stocks.
Market Selloff
Spain and Portugal, also suffering from gaping deficits after the worst recession since World War II, have been sucked into a market selloff that has seen the euro fall to a nine- month low against the dollar on concern that swelling shortfalls will stifle Europe’s recovery.
Moody’s Investors Service said today that Greece shouldn’t be grouped with Spain and Portugal and that Greece faces “material challenges.”
“The Greek government’s plans are very ambitious, although if implemented exactly as promised, the rating could stabilize at A2,” according to the Moody’s report. “If the implementation falls just short of the execution promised by the Greek authorities, then we may adjust the rating to A3 in the coming months.”
“However, if only partial implementation is achieved, then we may downgrade Greece’s rating to Baa1,” Moody’s said.
Bonds Jump
Greek, Spanish and Portuguese bonds jumped yesterday after the EU signaled it may aid Greece. The euro rose the most in more than five months and the Greek 10-year bond yield dropped the most since at least 1998.
The premium investors demand to buy Greek debt over comparable German bonds ballooned on Jan. 28 to the highest since 1998 amid concern that Papandreou’s deficit plan relied too much on one-off measures for revenue and not enough on spending cuts.
Greek 10-year yields fell 33 basis points to 6.06 percent. The Greek-German 10-year yield spread narrowed 36 basis points to 288 basis points. The benchmark Athens stock index rose 3.2 percent to 1,956.44 at 3:50 p.m. in Athens, spurred by a 5.8 percent gain in National Bank of Greece SA, the country’s largest lender.
Olli Rehn, who today takes over as European economic affairs commissioner, said the EU may offer Greece “support in the broad sense of the word.” In Paris, after meeting with French President Nicolas Sarkozy, Papandreou said Greece was ready to take any measures to meet its deficit goals.
Hiring Freeze
Hours before the strike, Greek Finance Minister George Papaconstantinou reiterated a hiring freeze for civil servants. He also said the government will offer a tax amnesty on funds held abroad in a bid to boost revenue.
While forbidden by law to take part, police, fireman and coast guard workers said they will also join the rallies.
“This game of speculation is being played out at the expense of the worker,” said Yiannis Grivas, the head of the union of tax collectors, which held a 48-hour strike last week and will rally again on Feb. 17.
Still, not all public workers are striking.
More than 64 percent of 2,299 people polled in the two days after Papandreou announced additional deficit-cutting measures believe his government is moving in the right direction and the measures are necessary, according to a Kappa Research poll for To Vima newspaper on Feb. 7.
“Why should I strike and lose 50 euros?” said Effie Strati, a childcare worker at a state-run nursery. She said all her colleagues will be at work.
To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net; Natalie Weeks in Athens nweeks2@bloomberg.net.
Last Updated: February 10, 2010 09:25 EST
