Greece geared up for a nationwide strike on Wednesday called by unions to protest cuts as financial markets waited to see how Athens will finance itself out of a debt crisis shaking the European Union. "The strike should be a big success and should paralyse the whole country," Stathis Anestis, a leader of the powerful Greek General Confederation of Labour union, known as GSEE under its Greek acronym, told AFP on Monday. The strike -- the second major protest since Greece unveiled austerity measures -- will mobilise thousands of workers, bringing ships, planes and trains to a standstill, as well as shutting down banks and newsrooms. Greece has vowed to reduce its budget deficit from an estimated 12.7 percent of GDP (gross domestic product) in 2009 to below the EU limit of three percent by 2012 but has warned major cuts in public spending will be needed.
Social action will also do little to calm investors, who have dragged down the value of the euro and boosted the risk premium on buying Greek government bonds in recent weeks amid fears that Greece could default on its debt.
A crucial test of market confidence in Greece could come as early as this week with the government attempting a multibillion-euro (dollar) bond issue, the Financial Times reported earlier, citing bankers in Athens.
Prime Minister George Papandreou added further urgency in an interview with the BBC's "Andrew Marr Programme" on Sunday in which he said that Greece's borrowing needs were only covered up until the middle of March.
"Our borrowing needs are covered till mid-March," Papandreou said, adding that Greece needs EU support "so that we can borrow at the same rate as other countries, not at high rates" that undermine the country's reform efforts.
The yield on 10-year Greek bonds -- the interest rate that Greece must pay on bonds it issues to borrow money in the markets -- was at 6.411 percent during trading on Monday, compared to 3.281 percent for German 10-year bonds.
The European single currency meanwhile was trading at 1.3602 dollars in morning London trade, down from 1.3608 dollars late in New York on Friday -- a far cry from the peak of 1.6038 dollars that it reached in July 2008.
A report in Germany's Der Spiegel magazine citing German finance ministry sources on Saturday said the eurozone could aid Greece to the tune of "between 20 billion and 25 billion euros" (27 billion and 34 billion dollars).
A ministry spokesman dismissed the report as "speculation."
Writing in the Financial Times on Monday, legendary financier George Soros said the crisis in Greece had highlighted fundamental problems with the workings of the 16-nation eurozone and warned the euro could collapse.
"If member countries cannot take the next steps forward, the euro may fall apart," he said, adding that the euro's construction was "patently flawed" and that "a fully fledged currency requires both a central bank and a Treasury."
Soros said that "makeshift assistance" should be sufficient to sort out Greece's debt problems but warned that other weak eurozone members like Ireland, Italy, Portugal and Spain could not be helped in the same way.
The European Union has pledged political support for Greece and has hinted at more concrete financial assistance in the future but it has also imposed strict deadlines and monitoring for Greece's deficit-cutting programme.
Greece has by far the highest budget deficit in the eurozone.
International ratings agency Moody's has also calculated that Greece must allocate 15.1 percent of its revenues to interest payments, about twice the ratio for two other debt-burdened eurozone members, Spain and Portugal.
22.02.2010
