Greek customs, tax officials strike over austerity program aimed at fixing debt crisis

Greek strike deepens debt crisis fears

ATHENS, Greece — Strikes in Greece and political wrangling in Portugal fed Europe’s government debt crisis on Thursday, amid concerns that leaders in Athens and Lisbon would not be able to push through unpopular austerity programs to tame their ballooning deficits.

Greece, under intense pressure from markets and other European Union governments to get a grip on its deficit, faced a first wave of strikes, with customs and tax officials walking off the job for 48 hours.

Doubts about its finances have also affected market sentiment toward the debt of Portugal and Spain, two other eurozone countries struggling with deficits. A Greek default would be a serious blow to the shared euro currency, but Greece and the EU have insisted that will not happen and that Athens can fix its problem with a program of sharp cutbacks and efforts to make its economy more competitive.

Spain’s Finance Minister Elena Salgado dismissed worries that her country’s debt and other economic problems pose a Greek-style risk for the eurozone, saying “there is no comparison” between the Spanish and Greek situations.

Prime Minister Jose Luis Rodriguez Zapatero’s government announced last week that its deficit for 2009 was equal to 11.4 percent of GDP, nearly four times the EU limit. It announced a 4-year austerity program with euro50 billion in spending cuts to try to bring the deficit back down to 3 percent of GDP in 2013.

Markets remained skeptical, however, with the Ibex-35 index at the Madrid stock market plunging 5.94 percent — the largest drop since Nov. 2008.

Share prices on the Lisbon Stock Exchange in neighboring Portugal also fell sharply, with the benchmark PSI-20 index closing down 4.98 percent — also the steepest fall since Nov. 2008. In Athens, the Stock Exchange general price index closed down 3.33 percent, while spreads on Greek government bonds over the equivalent German bond — a key indicator of market confidence — hovering around the 350 point mark.

Portugal’s minority Socialist government is facing potential defeat against opposition parties which want to hike spending in some areas, and who could outvote the government in Friday’s parliamentary session. The minister for parliamentary affairs, Jorge Lacao, warned of “serious political consequences” if Parliament passes the opposition proposal.

Finance Minister Fernando Teixeira dos Santos intends to cut government jobs, freeze civil servants’ pay and contain spending as part of the center-left government’s efforts to curb the rising debt. He has refused to hike taxes.

Greece’s customs strike will choke imports until next week, with fuel supplies likely to suffer first. Lines of trucks were already forming at the country’s borders, with customs workers allowing through only perishable goods and pharmaceuticals.

More walkouts are planned for later this month, with the country’s two largest umbrella union organizations calling separate 24-hour strikes, one for next Wednesday and one for Feb. 24.

“We are determined to make these changes and we have asked everyone to contribute to this,” Socialist Prime Minister George Papandreou said during a visit to India, where he was attending a conference on sustainable development.

Papandreou has pledged to bring Greece’s budget deficit down from 12.7 percent of economic output to 2 percent in 2013, and this week broadened his austerity plan to include blanket civil servant pay freezes, increased retirement ages and a hike in fuel tax.

The EU has endorsed the plan, with EU Economy Commissioner Joaqin Almunia saying it was “achievable.” A European Commission report pressed Greece to tackle problems of competitiveness, including high public and private sector wage levels.

But it has not been enough to calm jittery markets, which seem worried that political resistance to cutbacks will keep Greece and Portugal from sticking to their plans.

“The key question that remains unanswered today, is quite where the money would come from to support the likes of Greece and Portugal if the capital markets prove reluctant to provide it,” said Simon Derrick, a senior currency strategist at Bank of New York Mellon.

With Germany apparently unwilling to lead a bailout, “the outcome of this apparent stalemate is that, amazingly, the unpalatable topic of an IMF bailout seems to have re-entered the discussion,” Derrick wrote.

The International Monetary Fund’s chief said the multinational lending agency was ready to help Greece solve its debt crisis if asked to, but that he did not think Greece was headed for bankruptcy.

“We are there to help,” Dominique Strauss-Kahn told the French radio station RTL. “I have a mission on the ground to provide technical advice requested by the Greek government. And if we’re asked to intervene, we will.”

But he added, “I understand that the Europeans don’t want this for the moment.”

EU and Greek officials have said Greece will not need a bailout — although this has not stopped speculation that other EU countries might be forced to step in with assistance. EU leaders last May doubled to euro50 billion a crisis fund to bail out the 11 EU members that do not use the euro; the Lisbon Treaty which came into effect Jan. 1 allows EU nations to use EU money to bail out a troubled member but does not say how.

Strauss-Kahn expressed confidence that Papandreou’s government would take the “necessary but extremely difficult” steps to solve the crisis.

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Associated Press writers Barry Hatton in Lisbon, Greg Keller in Paris, Daniel Woolls in Madrid and Aoife White in Brussels contributed to this report.