Greece put itself and the EU in uncharted waters this week by becoming the first eurozone country to ask for a loan lifeline involving the IMF as its economy risked running aground.
Athens on Friday called on the EU and the IMF to activate a rescue plan worth 45 billion euros (US$60 billion) to keep its head above water as the Greek prime minister described the country as a “ship about to sink.”
“All of us ... inherited a ship that is about to sink,” Prime Minister George Papandreou told Greeks on Friday from the tiny Aegean island of Kastellorizo as he lambasted his conservative predecessors for their handling of the economy.
“We are on a difficult course, a new Odyssey for Hellenism,” he said, referring to the Greek hero’s great voyage home from the Trojan War of antiquity.
The government said its hand was forced after the European Commission on Friday issued a sharp revision on its public deficit last year, followed by a new downgrade on its debt by ratings agency Moody’s, the latest in recent weeks.
“As the Greek saying goes, five in the hand is preferable to the hope of ten,” political analyst George Sefertzis said.
“The IMF has been linked to anti-social policies [in return for aid], but ensuring that the country does not go bankrupt is a much better overall defense of the poorer classes,” he said.
As the Greek finance minister headed to Washington for a scheduled IMF meeting and his staff brokered the emergency loan terms with a mission of EU, ECB and IMF officials in Athens, Greeks wondered where their future lay.
“This will change basic facts about our quality of life,” said Vassilis Korkidis, head of the Greek traders confederation.
The government on Friday admitted that its efforts to win over skeptical markets with tough crisis policies had failed and that those very efforts risked being nullified by the additional cost of Greece’s steeply rising loan rates.
The country has overall public debt of about 300 billion euros and the return it must pay to secure new loans has skyrocketed in recent weeks as investors feared Greece may be heading for a default.
The rate on Greek 10-year bonds — a benchmark instrument — has risen from around 5 percent last year to more than 8 percent this week.
However, after being hit with a barrage of spending cuts and tax hikes worth around 16 billion euros this year, many Greeks — and especially labor unions — are saying enough is enough.
“The question is who will decide on policies and how?” Korkidis said. “Are we giving up central functions and responsibilities to a group a technocrats, and what repercussions will these decisions have on the social state?”
So far the bulk of cuts have hit the Greek civil service, a haven of fiscal waste that successive governments had not dared to touch.
A source of envy and resentment for many Greeks — particularly those not employed in it — it was padded for decades with political appointees and became a byword for sloth.
However, while Greeks concede the end of the civil service bonanza was long overdue, there are fears that the EU and IMF will demand more austerity measures such as broader wage cuts that will plunge the country into a recession even deeper than the one it now faces.
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