Greek civil servants strike over pay cuts; EU revises Greek budget deficit upwards

By Derek Gatopoulos, AP
Thursday, April 22, 2010

Greek debt crisis gets worse as EU revises figures

ATHENS, Greece — Civil servants staged a 24-hour strike Thursday against austerity measures and expected job cuts by Greece’s crisis-plagued government, and the EU’s statistics agency said the country’s budget was even worse than previously thought.

The strike disrupted public services, shut down schools and left state hospitals working with emergency staff. Protesters from a Communist-backed trade union blockaded Athens’ main port of Piraeus, disrupting ferry services.

Eurostat, meanwhile raised Greece’s budget deficit in 2009 to 13.6 percent of gross domestic product from its earlier prediction of 12.9 percent, while the ratio of government debt to GDP stood at 115.1 percent, the second highest in the European Union after Italy.

In comments that are sure to rattle markets, the statistics agency also expressed “a reservation on the quality of the data reported by Greece.” It also said Greek’s 2009 figures could be revised further, to the tune of 0.3 to 0.5 percentage points of GDP for the deficit and 5 to 7 percentage points of GDP for the debt.

Markets were shocked last fall when the government announced that the previous conservative Greek government had issued misleading financial data for years.

About 3,000-4,000 protesters marched through central Athens, carrying banners reading “tax the rich” and “Don’t take the bread from our table.” Scuffles broke out when about 150 demonstrators challenged police lines near the city’s central Syntagma Square, and police responded with tear gas.

Greek airports remained open, however, after air traffic controllers suspended their participation in the strike because of the travel chaos caused by Iceland’s volcanic ash cloud.

Labor unions fear deeper cuts after the Socialist government began talks this week with the International Monetary Fund, the European Central Bank and the European Commission for a three-year rescue package aimed at easing the country’s acute debt crisis.

“The IMF has the same cookie-cutter solution for different economies … Now they are making a European cookie cutter,” said Spyros Papaspyros, head of the civil servants umbrella union, ADEDY.

News of the revised figures sent Greece’s borrowing costs shooting up to new record highs. The interest rate gap, or spread, between Greek 10-year bonds and German ones — considered a benchmark of stability — widened to 5.29 percentage points minutes after the announcement, from 5.03 percentage points earlier in the morning. The spreads translate into prohibitively high interest rates of more than 8 percent, more than twice those of Germany’s.

Athens said its target of reducing its deficit by at least 4 percentage points in 2010 remained unchanged despite the revision.

“The government has already adopted all the necessary measures in excess of 6 percent of GDP to ensure the achievement of this objective,” the Finance Ministry said.

It said the new figures showed the scale of Greece’s financial troubles, which it blamed on mishandling by the previous, conservative government.

Greece is struggling to cope with a debt of euro300 billion ($406 billion) and needs to borrow about euro54 billion this year alone. It has a projected public debt of more than 120 percent of gross domestic product through 2011.

On Tuesday, the government shaved its May borrowing requirement by raising euro95 billion ($2.62 billion) in a 13-week treasury bill auction that was oversubscribed. The public debt management agency said Thursday it had accepted an additional euro450 million in noncompetitive bids for the treasury bill auction, which has a settlement date of April 23.


Associated Press writer Elena Becatoros in Athens contributed.

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