Wednesday, February 10, 2010

ATHENS — A strike by civil servants shut schools and grounded flights across Greece on Wednesday as unions challenged cutbacks aimed at ending a government debt crisis that has shaken the European Union.

Air traffic controllers, customs and tax officials, hospital doctors and schoolteachers walked off the job for 24 hours to protest sweeping government spending cuts that will freeze salaries and new hiring, cut bonuses and stipends, and increase the average retirement age by two years to 63.

The strike left state hospitals working with emergency staff only and disrupted national rail travel, although urban mass transport was unaffected.

“It’s a war against workers, and we will answer with war, with constant struggles until this policy is overturned,” said Christos Katsiotis, a representative of a Communist Party-affiliated labor union.

TWT RELATED STORY: European economies facing grim times

Despite the strikes, markets reacted positively to indications that wealthy European countries are closer to rescuing Greece. Stocks in Europe rose Wednesday for the second day on expectations of some kind of decisive action to prevent a Greek debt default that could spread to other EU countries.

European Union leaders are to discuss Greek’s economic woes during a summit Thursday in Brussels. European Central Bank President Jean-Claude Trichet is making a rare appearance at the summit, which the markets saw as confirmation that some kind of help for Greece would be discussed.

Bond market fears of default appeared to recede, judging by the shrinking interest rate spread between 10-year Greek government bonds and benchmark German ones. The spread, or difference, stood at 2.83 percentage points, down from about 3.20 percentage points late Tuesday and from 3.5 percent last week.

Prime Minister George Papandreou declared that the austerity program would go forward “in every measure.”

Despite the harsh union rhetoric, turnout in Athens’ two peaceful protest marches was low, at about 7,000 amid drizzly weather, in a country where union demonstrations typically draw tens of thousands. Another 3,000 people showed up for two rallies in Thessaloniki, Greece’s second-largest city.

A weekend newspaper poll showed that 70 percent of Greeks backed the prime minister’s call to cut civil servants’ pay and perks but were against measures that could affect them individually, such as new taxes or a higher retirement age.

Greece has come under intense pressure from its EU partners to slash spending after it revealed a massive and previously undeclared budget shortfall last year that continues to rattle financial markets and the euro, the currency shared by 16 EU members.

Mr. Papandreou, who was in Paris on Wednesday to discuss the economic crisis with French President Nicolas Sarkozy, repeatedly has said Greece will sink under its debt unless everyone contributes to a solution.

“We are absolutely decided that the stability program will be implemented in every measure,” Mr. Papandreou said after meeting with Mr. Sarkozy. “We are ready to take any necessary measures to make sure the deficit goal is met.”

Labor unions ended weeks of caution Wednesday after Mr. Papandreou’s new Socialist government deepened cuts, raising the retirement age and even hitting up the country’s powerful Orthodox Church for more taxes.

“It wasn’t the workers who took all the money, it was the plutocracy. It’s them who should give it back,” said Alexandros Potamitis, a 57-year-old retired merchant seaman.

Vassiliki Romanou, 50, an employee at the state Social Security Foundation, conceded that many civil servants enjoy high salaries and some can retire after working only 20 years.

“I can’t say the government’s measures are totally wrong, but I think they are unfair to me,” she said.

The government has insisted that those on low incomes will be protected and the austerity plan will target the better off.

“I don’t care about the (country’s) problems. I didn’t steal a single euro. Why should I pay?” said Christos, an elderly man who said he retired after working for 47 years and was now barely surviving on a pension of 640 euros ($880) a month. He refused to give his surname, saying he was afraid he would lose his pension if he complained.

Finance Minister George Papaconstantinou announced more austerity measures before the strike, including adding 0.14 euro ($0.19) in fuel taxes so that a liter of unleaded gas costs 1.29 euros ($6.74 a gallon).

He also announced plans to force all Greek businesses — including gas stations, cab drivers and vendors at farmers markets — to issue receipts in an effort to fight Greeks’ notoriously lax compliance in paying taxes. The average retirement age also will increase to 63 by 2015.

The umbrella civil servants union that called Wednesday’s 24-hour strike, ADEDY, said it also will join a private-sector strike by Greece’s largest labor organization, the GSEE union, on Feb. 24.

Taxi drivers in Athens also declared they will strike on Thursday.

It remains unclear whether the protests represent the start of a serious labor backlash or just typical union dissatisfaction in a country where strikes are common.

Mr. Papandreou’s Socialists came to power in early elections last October, drumming the Conservative party in the polls, and they now enjoy a strong majority of 160 seats in the 300-member Parliament, compared with the main opposition’s 91.

Mr. Papandreou already has faced down a protest by farmers, who demanded higher subsidy payments and staged tractor blockades on Greek highways for nearly three weeks, ending Tuesday.

Associated Press writers Derek Gatopoulos in Athens, Costas Kantouris in Thessaloniki and Angela Charlton in Paris contributed to this report.

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