Sense of despair in Greece at seepage of sovereignty


Severe conditions loom for a nation needing to shape up for its required bailout, writes ARTHUR BEESLEYin Athens

AFTER WEEKS of haggling with the EU, International Monetary Fund and European Central Bank “troika”, an air of expectant dread seemed to descend over Athens yesterday as Greeks waited to be told the sacrifices they must make in the next phase of their bailout.

Ten days into their demonstration at the incoming wave of austerity, hundreds of protesters inspired by the “Indignant” movement in Spain are still camped out in Syntagma Square in front of the parliament. Thousands turned up every night this week to noisily declare their contempt for the country’s dire situation.

Their message is blunt. “Greece is not for sale – our politicians are,” proclaimed a placard. This refers to the sense of anger that many Greeks say they feel at the perceived failings of an entire political class. It doesn’t stop there.

There is increasing despair at the relentless seepage of sovereignty to the country’s international sponsors.

Another mega-protest is expected tomorrow, adding potency to broad-based movement in which overt support for any single organisation is not allowed.

Not to be outdone, the dominant public and private sector unions plan a national strike on June 15th.

All of this serves to fire up tension over the country’s bailout sacrifices among MPs in the ruling Pasok Socialist party.

A 16-strong group of them is already agitating against moves by prime minister George Papandreou to put a new package of austerity and privatisation measures to a single vote of parliament. Other government MPs took to the airwaves yesterday morning to declare their approval for this stance.

No matter how it is dressed up, external involvement in the country’s feeble tax collection system will not play well and is certain to be attacked as an improper intrusion into the country’s internal affairs.

Such agitation heralds serious trouble for Papandreou, who is struggling to convince his European counterparts that he can bring the rescue plan back on track.

In Greece, critics say the bailout measures have intensified the economic crisis. EU leaders, however, are deeply unhappy with the slowdown in the reform effort.

The main action yesterday was in Luxembourg, where Papandreou met Jean-Claude Juncker, chief of the group of euro zone finance ministers. As if the domestic pressure on Papandreou is not enough, his international engagements are set to become a lot tougher in the coming days.

Against the backdrop of broken pledges and deep divisions in his own cabinet, he must persuade his EU counterparts anew that he will be as good as his word. For their part, EU leaders are telling Papandreou to put his house in order.

While Greece has now struck a bargain with the troika to ensure the release of the next €12 billion loan due under its existing bailout, that’s only part of the story.

The loan’s release had been in question due to Papandreou’s failure to implement promised reforms, the slowdown being a reflection of his government’s fear of the adverse public reaction to the accumulation of austerity.

This helped to erode market confidence in the rescue, leading the troika to conclude that the country has no hope of making its return to private debt markets next year. A second bailout is now in prospect – most likely for €60 billion – but that will come at a heavy price.

For one thing, the authorities want to ensure there is no further slippage in the Greek reform programme. For another, many of the European leaders who are underwriting the bailouts are themselves under increasing internal pressure over the rescue effort.

This includes, above all, the German chancellor, Angela Merkel, the most powerful figure in the battle against the sovereign debt crisis.

As a result, the conditionality built into any new package for Greece will be severe.

Not for nothing did ECB chief Jean-Claude Trichet say on Thursday that the second stage of an intervention “has to be different” if the country does not deliver on its obligations first time round.

That Merkel is leading the charge here is no surprise. While the chancellor is not alone in her demand for strict conditionality, it is she who sets the bottom line.

To appease Berlin, Greece will have to provide “cast-iron guarantees” on the delivery of its contentious privatisation plan. Budget and social reforms will have to be intensified and burden-sharing with private investors must also be secured.

This is a huge ask for Papandreou. In reality, however, he has little choice but to bend to the will of his international sponsors.

We will soon see whether Pasok MPs – and the wider community in Greece – can accept that. It’s not getting any easier.