Athens, May 2 (DPA) Greek Prime Minister George Papandreou announced Sunday that Athens has reached an agreement with the European Union and the IMF for a multi-billion euro rescue package – but warned ordinary citizens would have to make “great sacrifices”.
“I will do anything to avoid the country going bankrupt,” Papandreou said during a televised cabinet meeting Sunday.
“Every Greek will be called upon to make great sacrifices to avoid disaster,” he added, saying the deal would be ratified later Sunday.
“It is an unprecedented support package for an unprecedented effort by the Greek people.”
Finance Minister George Papaconstantinou is scheduled to announce details of the austere spending cuts, as part of the loan agreement worth some 120 billion euros (160 billion dollars) over three years, immediately after the cabinet meeting.
The prime minister said the measures will affect public sector pay and pensions but not the private sector, as initially believed.
The deal, in exchange of tough measures, will be the first such rescue of a member of the 16-nation eurozone and eurozone finance minister have scheduled an emergency meeting later Sunday in Brussels to approve the European Union’s share of the deal.
Even if the measures are enough to stop the crisis from sinking other fragile European Union economies, the future remains stormy in Greece as public resistance to more cuts may hamper implementation of the reforms.
Angry protesters and riot police clashed in central Athens Saturday after thousands took to the streets in May Day rallies to signal their opposition to plans for the harsh public spending cuts.
According to one recent poll, in a country where one in five lives below the poverty line, more than half of Greeks say they will take to the streets if the government agrees to new austerity measures.
On Saturday, more than 12,000 people marched through Athens towards the US embassy to protest the measures while striking workers cut off sea transportation between islands and on the country’s railway network.
Clashes could be seen in Athens as riot police fired tear gas at a group of rock-throwing anarchists in front of parliament in the capital and at the Polytechnic University.
Anarchists also battled with police in the northern port city of Thessaloniki, where more than 5,000 people demonstrated.
Union leaders claim Greece is being asked to scrap salary bonuses that are worth two months’ wages, impose a three-year pay freeze, raise the value added tax from 21 to 23 per cent, increase the retirement age from 62 to 67, as well as a public sector hiring freeze.
The government has already carried out three sets of austerity measures including tax hikes and pension freezes over the last six months.
Athens insists it needs help by May 19, the day it is expected to issue a nine-billion-euro bond issue to refinance its debt, in order to avoid a default that could spread to other eurozone countries with immediate deficit crises, such as Portugal and Spain.
But unions, already reeling from austere budget cuts, have called a new round of strikes May 5 to protest against cuts foreseen for 2011 and 2012, saying they impose most of the sacrifices on low to middle income workers.
The public sector union ADEDY, which represents half a million workers, has also called a four-hour strike for Tuesday, on top of a nationwide strike already decided for Wednesday.
Greek authorities aim to achieve 24 billion euros of spending cuts, lowering the deficit by 10 percentage points, currently standing at almost 14 percent of gross domestic product (GDP).
That is almost five times the 3 percent level foreseen by eurozone rules, which are regularly flouted by its members.
The spiralling crisis, which saw the euro fall against the dollar amid credit rating downgrades for Greece, Portugal and Spain – led Germany to finally bow this week to international pressure to speed up the rescue operation.
Berlin initially held a tough stance, especially since bailing out profligate Greeks is unpopular amongst German voters and may hurt Merkel’s centre-right coalition’s chances in the May 9 state election in North Rhine-Westphalia.
Greece has been guilty of its free-spending ways for decades, running up debt equal to 115 percent of GDP. However, the revelation that official government statistics had also been massaged before and after joining the single currency added to the sense of crisis.
