Embassy Row

SOCIALIST AUSTERITY

The deputy foreign minister of Greece readily concedes the irony of a socialist government slashing the budget and cutting treasured social programs - actions that send thousands of union workers into the streets, denouncing the ruling party as a lackey of “bankers and bosses.”

“Definitely it is a difficult time for a socialist government,” Spyros Kouvelis told Embassy Row on Thursday, as he visited Washington to explain how Greece is dealing with the worst economic crisis in the European Union. “On the other hand, we are trying to make people understand that there is only one way out.”

Prime Minister George Papandreou introduced a series of austerity measures aimed at reducing the government’s 13.6 percent budget deficit to 8.1 percent this year. The government adopted the tough programs that cut the budget by nearly $14 billion after the European Union and the International Monetary Fund (IMF) agreed to an emergency loan of $139 billion to prevent the collapse of the economy and save the euro, the currency used in Greece and 15 other EU countries, from devaluation.

The socialist government inherited the economic crisis after defeating the ruling conservative party in snap elections last year. The global financial recession hit Greece particularly hard because of years of overspending on government services.

“The global economic crisis hit Greece, which already had high debt and a high budget deficit. Greece was very vulnerable,” Mr. Kouvelis said. “But we looked the truth in the eye and realized [the Greek crisis] was mostly homemade.”

The reform measures include higher taxes, tougher tax collection laws and even taxes on church property, but not the churches, he said.

Mr. Kouvelis said the government was pleased with a report released Wednesday by the EU, the IMF and the European Central Bank that concluded the austerity program is working. The report noted that the “overall assessment is positive,” but that “further progress is needed.”

“Things are going better than expected,” Mr. Kouvelis added.

Michael Heise, chief economist at the German-based financial services corporation Allianz, agreed. Greece “might even manage to undershoot” its 8.1 percent deficit target because the austerity program is “actually proceeding faster than planned,” he wrote Thursday in the Wall Street Journal.

Greece also is trying to recapture its tourist market, which has been hurt by labor union strikes. As Mr. Kouvelis toured Washington to promote the Greek economic reform measures, Greek unions staged their fifth national strike since February.

However, as Mr. Kouvelis and news reports from Athens noted, the demonstrations are getting smaller.

‘MEAT ON THE SKELETON’

Expect more European diplomats in Washington sometime soon, now that the European Parliament has approved a new diplomatic service for the European Union.

Anthony Smallwood, a spokesman for the European Delegation here, said exact numbers or positions have not been determined.

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