Authorities are under siege from many of their own people and financial markets, writes ARTHUR BEESLEYin Athens
STRONG SUN glares down on a crowded Athens street. The traffic is at a mid-morning halt but a daring motorcyclist weaves past the gridlock at impressive speed. No helmet, no problem.
The Greek authorities are under siege from the markets, their international sponsors and many of their own people. Downtown in the capital, however, it’s business as usual. There’s scarcely a seat to be had in the cafes near the parliament.
The government is having a difficult time of it in talks with the EU/IMF “troika”, but an agreement to release the next €12 billion in loans could be made public as early as today.
Even as renewed street protests continue, Greek prime minister George Papandreou has no shortage of defenders. They talk of a “silent majority” of Greeks who back his effort to fundamentally overhaul the country’s crippled economy.
Swingeing new reforms are in store as is the long-delayed privatisation of key state assets, greatly increasing the political stakes for an exhausted administration. The political atmosphere is increasingly tense, but talk of external intrusion in tax collection or a return to the drachma is quickly dismissed. “100 per cent provocative, a joke,” says an official.
About noon yesterday, Papandreou received mild applause from an invited audience when he arrived in an Athens theatre to give a speech on climate change. It was a lacklustre affair, but present in the room were management figures from key state companies which will soon be sold. They are not happy, and neither are the people they employ. For now, the real action is in the finance ministry, where officials are hammering out yet more painful reforms with their international lenders. Papandreou faces claims from his critics that he is moving either too slowly or too quickly to advance seismic economic change.
Yannis Stournaras, an economist who negotiated Greece’s entry into the euro in the 1990s, points to “reform fatigue” in the government as key ministers seek to appease the trade union movement and the wider Pasok party. He estimates that about half the cabinet aren’t on board. “There is a perception that something isn’t going well, that there are delays,” he says.
“You need a new start which is supposed to happen with these new measures, which will correct the fiscal derailment of the first semester of this year and, second, which will be much more specific for the next three years on the fiscal front and on privatisations.”
The challenges are huge: a massive national debt; an overbearing, unwieldy state sector; rampant, sophisticated tax evasion; corruption; inhibited entrepreneurship; and closed-shop practices in key professions. In government circles, however, they say no nation can change its cultural DNA overnight. Papandreou is under pressure from the troika to go further, faster, but his supporters argue that he has not received adequate international recognition for the effort already made.
They say three civil servants from the anti-corruption unit were jailed last week for taking bribes. A respected judge has taken command of a new Revenue inspection force, which has police powers. “You can feel the fear now,” an official maintains.
Internal government papers say a 5 percentage cut in the general government deficit in 2010 was the “biggest fiscal consolidation effort” in a single year by any euro zone country.
Among the government’s top priorities, commentators cite the need to regain “the trust of the country and address the sense of ‘standstill’ that exists in the markets.” This is hugely significant. Whatever about a long dispute with the troika over the release of the next €12 billion, the “standstill” means Greece will not get back into the markets next year.
With full-blown debt restructuring all but ruled out, a second bailout pact now looms. Within Greece and in the wider euro zone, that carries increased political and financial risk. The temperature is rising.