Bah Humbug

11.08.12

Greece Cancels Christmas as Austerity Measure

Greece votes to cancel Christmas, along with all other paid holidays for public servants—but European financial leaders say its austerity triage might be too little, too late.

Just after midnight last night in central Athens, Greece’s Parliament voted to cancel Christmas and Easter, along with all other paid holidays, for public servants.

The legislators also voted to cap salaries at the Bank of Greece at €5,000 a month—around $6,400 in U.S. dollars—meaning that even the country’s most highly-trained financial workers will take home less than $3,800 after taxes. They voted to hike the retirement age from 65 up to 67, and to cut pensions for those already retired by 15 percent. Pay for military personnel and other civil protection servants will be slashed by as much as 35 percent, and judges’ salaries will be shaved by a third. Nearly 2,000 civil servants will lose their jobs in January 2013 if they can’t be transferred to other positions, and then some 6,000 more will lose their jobs every three months until the public sector payroll is manageable.

Not surprisingly, perhaps, many Greeks did not support the omnibus austerity bill, and nearly 100,000 angry demonstrators marched on Syntagma square outside Parliament to make their voices heard. Their rage was bolstered with Molotov cocktails, petrol bombs, and glass bottles. When things got out of hand, Greek police dusted off their water canons and blasted the angry crowds. Over 100 protesters were arrested and a dozen people were injured.

In many ways, Greece was once again debating—both in Parliament and on the streets—whether to stay in the euro zone or to finally give up trying to please the Troika, the trio of international moneylenders made up of the European Commission (EC), European Central Bank (ECB), and International Monetary Fund (IMF) who control more than $300 billion in bailout payouts for the debt-stricken nation. Before the vote, Greek Prime Minister Antonis Samaras appealed to the 300-strong Parliament, saying that they were deciding not just how to tighten the burgeoning budget and wrestle the growing debt, but whether to stay in the euro club at all. “Today we are voting,” Samaras said, “on whether Greece will remain a member of the euro or return to international isolation, collapse into bankruptcy, and go back to the drachma.”

At one moment during the Parliamentary debate, things became almost as tense inside the building as they were outside. A legislator, desperate to shave a few thousand euro off the budget, proposed cutting salaries for Parliamentary workers who had been exempt in previous incarnations of the package. In what lawmakers called an impromptu protest that could have led to complete chaos, the workers helping facilitate the vote stopped in their tracks and threatened to walk off the job. Greek Finance Minister Yannis Stournaras nixed the idea and scratched Parliamentary worker benefits from the list of proposed cuts, allowing the vote to continue.

In the end, the austerity measure passed 153 to 128, with 18 crucial Parliamentarians in Samaras’s now-very weak coalition abstaining from the vote. Samaras immediately expelled the rebel legislators from his team and spun the passing of the tough austerity package as “a large, decisive, and encouraging step towards recovery and better days for Greece. ”

Those watching the Greek tragedy are worried that it now could be the Troika’s turn to not hold up their end of the bargain.

But the journey isn’t over yet. On Thursday morning, hours after the vote, German Finance Minister Wolfgang Schäuble threw cold water on the nation’s hopes that passing the bill would lead to an immediate handover of a payout check for $40 billion, which the Greek treasury desperately needs by Nov. 13. After that point, the country will effectively run out of money and have to issue the equivalent of an IOU for public worker paychecks. The bailout payment, which has been frozen since before Greece’s last June, is direly needed and has been held like a carrot over the Greek leaders to force them to pass tough measures “to prove” their fiscal discipline. But it may not be enough. “We are not out of the woods yet,” Schäuble told finance leaders in Hamburg. “At the moment I don’t see how we can take the decision [to make payment] by next week.”

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A protester holds a mock gallow during a demonstration against new austerity measures outside the parliament in Athens on Nov. 7, 2012. Greek police today used tear gas to disperse demonstrators protesting outside parliament ahead of a key vote on a new round of austerity measures. Some protesters responded by hurling petrol bombs at police forces as the demonstration by some 70,000 people in Athens briefly flared up. (Louisa Gouliamaki, AFP / Getty Images)

Those watching the Greek tragedy are worried that it now could be the Troika’s turn to not hold up their end of the bargain. “I am extremely concerned by today’s statements by EU leaders—especially Mr. Schäuble’s statement that the delayed loan payment will not be authorized immediately, even though last night the Greek Parliament authorized the new package of measures,” Roman Gerdomis, an expert on Global Affairs and the Greek economy at Bournemouth University, told The Daily Beast.

“Apart from the financial implications for Greece’s day-to-day public sector payments and operations, these statements have already had massive ripple effects on the Greek media and the public opinion, with leading pro-Euro commentators now turning against the Troika, which is perceived as wishing to humiliate the Greek government,” Gerdomis said. “Unless a swift resolution is favored and unless the euro zone acknowledges the efforts of the Greek government and of the Greek people at large, this reaction could soon spiral out of control.”

At issue is whether the austerity measures passed this week are enough to turn the Greek economy around, or whether the current package is just the tip of an iceberg with even deeper cuts to come in 2013. The Greek debt is forecast to hit 189 percent of the nation’s GDP in the next year—even with the measures passed on Wednesday night—and the Samaras government says it needs a two-year extension to keep its promises to the Troika. A second vote to be held on Sunday will take into consideration several logistical issues dealing with the structure and timing of the cuts. But European Economic and Monetary Affairs Commissioner Olli Rehn told reporters in Brussels that Greece has just begun its battle for solvency, implying that even this week’s massive austerity measures amounted to nothing more than rearranging deck chairs on the Titanic. “There is no denying that it is increasingly unsustainable without further measures designed for reducing Greek debt.”

That is hardly good news for the Greeks, who already feel that they’re paying a hefty price for decades of corrupt government and financial failures. Greek opposition leader Alexis Tsipras, who ran on an anti-euro mandate last June, called for snap elections prior to the Wednesday vote and has vowed to push Samaras out of power once and for all, calling his plan for Greece a national disaster. After the vote, Tsipras said that passing the measure was like committing national suicide: “The only extension we need is for the rope with which we will hang ourselves.”