Greece Self-Destructs with Budget Cuts and Violence
As fear over the worsening economic climate continued to grow today with the Greek government’s latest austerity measures, thousands of citizens joined a 24-hour general strike in protest, demonstrating in front of parliament where the €28 billion package was being discussed.
While most protesters were peacefully demonstrating, violence quickly erupted with street battles between protesters and Greek riot police. Video of the rioting shows police releasing tear gas on large crowds gathered in front of parliament, and protesters attacking police with long planks of wood. Dark-hooded anarchist youths showed up to hurl rocks, chairs, bottles and firebombs at the police. The anarchists’ presence angered protesters, some of whom responded with violence against the youths.
Now senior government officials are saying the Greek Prime Minister, George Papandreou, might resign to facilitate forming a national unity government with Greece’s opposition political parties. Officials also say the prime minister would remove Finance Minister George Papaconstantinou from his post if such a government were formed. Papaconstantinou has attracted a lot of negative attention for spending cuts he’s instituted that have led to lost jobs.
Papandreou’s resignation would come with strings attached, and he would only step down if “all the political parties agreed to a specific framework for the country to exit from the crisis,” according to one of his officials. “But in order for that to happen, there must be a commitment that the government’s policies continue” as they are currently outlined. The policies Papandreou wants to continue are the same austerity measures being protested today. Having a new set of austerity measures by the end of June is a precondition for receiving the next disbursement of bailout money, €110 billion from the EU and the IMF.
Meanwhile, European officials met in Brussels today to discuss the second aid package for Greece, but the ECB and Germany (NYSE:EWG) continue to disagree over the potential role of the private sector in the bailout, with the ECB trying to avoid restructuring, which would be construed as default, by any means necessary. Fears of possible default have already hurt Greece’s already weakened economy, with Standard & Poor’s (NYSE:MCO) downgrading Greece’s credit rating to CCC, the lowest grade of any nation in the world. The benchmark Greek stock index (ATH: GR:GD) is down 1.88% today and the euro has dropped 1.6% to $1.4198. Greek bank shares also dropped today as Standard & Poor’s lowered their ratings to CCC as well, pushing shares in National Bank of Greece (NYSE:NBG), which trades on the New York Stock Exchange (NYSE:NYX), down 5.34%. Even French banks are hurting after their Greek interests threaten a possible Moody’s (NYSE:MCO) downgrade.
One of the biggest concerns of protesters are the proposed cuts to spending that would likely result in pay cuts and layoffs. Many public sector workers gave in to significant pay cuts earlier in the year when they were told it would help fix the current crisis. Then they saw the state of affairs continue to deteriorate, and won’t be able to handle the burden of another decrease in salary, especially when it seems less and less likely to be able to fix the problem. Proposed cuts total €6.5 billion and are a condition of the EU’s and IMF’s bailout. Today is the third day this year to witness millions of workers walk out of work, disrupting public services and transit across the country.
For more information about how Greece’s economic woes are affecting banks, businesses, and stocks, check out: Is This Bad Economic News a Sign of Greece’s Imminent Collapse?