The Greek economy will shrink 5% in 2011, more severe than expected, resulting in the public deficit soaring to 8.8% of GDP. The experts of the IMF, the European Central Bank and the European Commission left Athens hastily on Friday.
The Greek debt crisis is by turns a psychodrama and a tragedy. Tuesday evening, an expert commission of Parliament revealed in an official report that the countries indebtedness was "out of control." The next day, denial and criticism poured forth. Evangelos Venizélos, the finance minister, not mincing his words, declared that these expert accountants had "neither the knowledge, nor the experience, nor the position necessary to judge the debt"; a few hours later, the director of the Parliamentary commission so incriminated resigned.
Stock market collapses
Friday, the crisis advanced into a new stage with the surprise announcement of the suspension, for ten days, of the mission inaugurated at the beginning of the week in Athens by the troika (the European Union, the European Central Bank, and the International Monetary Fund). This precipitous departure provoked an outcry in the country and the stock market collapsed on opening, dragging the European markets along in its wake. The finance minister attempted to minimize the event: "There has not been a rupture in discussions between the country and the troika," he assured. But Evangelos Venizélos' attempts at reassurance failed, which even he admitted, saying shortly thereafter that "Greece has not attained its objectives for reducing the public deficit in 2011, on account to the worsening of the recession in the country." GDP is likely to decline by 5% this year, the government now forecasts, which leads mechanically to an anticipated deficit of 8.8% of GDP at the end of 2011, contrary to an earlier estimation of 7.4%.
It is a fact, nearly a year and a half after putting in place its austerity plan, that Greece again has its back against the wall. The austerity measures engendered a strong recession and weighed against growth, competitiveness, and economic output. The unemployment rate reached 16.6% last month. "The Parliamentary commission was right. The debt is truly out of control, as it is constantly increasing and it will continue to grow," is the analysis of Stefanos Manos, a former finance minister. "It has been irritating to watch the government do nothing these last several months. No reform of the state sector, no privatization, but only increased taxes and wage cuts! There is more public spending then in 2009, before the crisis," he underlines. "Now, it is urgent, bankruptcy is just around the corner. The international powers must be firm. They should refuse to grant the sixth tranche of loans worth 110 billion euros that was accorded to Greece if these measures are not applied." This was probably the thinking behind the departure of the troika, which meant by this dramatic gesture to put pressure on the government.
But this game of liars poker wearies the Greeks who suffer the full force of austerity. The last measure taken was to increase the VAT (Value Added Tax) from 13% to 23%. "A step too far," according to Giorgos Delastik, a political analyst. "Greeks are exhausted. They think above all that the austerity plan which was applied is not the right solution to save their country in this crisis, just as in Ireland and Portugal."
Strikes and demonstrations were not long in coming. First came strikes among teachers and employees of the Athens subway, and now the aggrieved have called for a grand protest this evening before the Parliament. For Ilias Iliopoulos, secretary-general of the state employees union, everything is currently at risk in Greece. "We are on the verge of a social explosion," he affirms. "In 2010, in order to reduce the deficit 5%, the Greek people made enormous sacrifices. Today, they cannot accept other austerity measures or new cuts in their wages." However, the troika requests 2.5 billion euros in savings by the end of the year. The authorities fear henceforth to be unable to contain the rage of the Greek people, who have been radicalized after the summer break.
Read the article in the original French here.
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| Greek protest in 2010. |
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