Thursday, February 11, 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 entire 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.

RELATED STORY: EU leaders offer Greece support, but no money

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 in 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 like new taxes or a higher retirement age.

Greece has come under intense pressure from its European Union 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, has repeatedly 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,” he said after meeting with Mr. Sarkozy. “We are ready to take any necessary measures to make sure the deficit goal is met.”

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