Greek unions said today that they would fight government austerity measures as they prepared for a 24-hour strike on Wednesday, a rebuke to the efforts of Prime Minister Papandreou to rally support for his budget-cutting reforms.The walk-out by Greek public sector workers, who are protesting against government plans for wage freezes, tax rises and an increase to the retirement age, will overshadow an EU summit meeting in Brussels on Thursday, when Europe's leaders will discuss the plight of Greece and other financially challenged states on the periphery of the eurozone, including Spain and Portugal.
The threatened civil service strike drove up the yield on Greek government bonds and depressed the value of the euro.
The single currency has lost about 10 per cent of its value since November as concern mounts about the fiscal challenge from the Mediterranean states.
Greek labour unrest is rattling investors, who fear that Prime Minister Papandreou will struggle to cut Greek government spending.
Greece is forced to pay a huge premium to borrow money compared with fellow eurozone governments and the difference between Greek bond yields and the benchmark German Bund yield widened by a further 15 basis points today to 3.65 percentage points.
The cost of insuring Greek government debt has also risen, settling today at €407,000 (£357,000) for each €10 million exposure.
Fears are growing that the debt problems of the periphery states will infect the euro, forcing the core member states of France and Germany to arrange financial bailouts of weaker countries.
The prospect of intervention was dismissed over the weekend by Wolfgang Schãuble, the German finance minister, at a meeting in Canada of G7 finance ministers, who also ruled out a rescue of Greece by the International Monetary Fund.
Greece is saddled with huge public sector debts, equal to 125 per cent of the country's GDP.
Prime Minister Papandreou has promised to reduce the gap between public spending and income, currently almost 13 per cent of GDP, to within the EU limit of 3 per cent by 2012 with tough budgetary medicine.
Greek unions were defiant today in the face of insistence by European governments that the Mediterranean state had no choice but to cut its cloth to an austere fashion.
"We are fighting so that the working people don’t get to pay for the crisis,” said a spokesman from ADEDY, the public sector union. “We demand a pay increase ... a fair tax system.”
source: times online
09.02.2010
