May Day In Greece More Like A Distress Call

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Greece is in the grips of a devastating financial crisis. Large rallies are being staged Saturday to protest expected new austerity measures. Prime Minister George Papandreou says wage cuts and tax hikes are necessary to ensure the country's survival.

SCOTT SIMON, host:

This is WEEKEND EDITION from NPR News. I'm Scott Simon.

Greece is in the grips of a profound financial crisis. Large rallies are being staged today to protest expected new austerity measures. Prime Minister George Papandreou says that wage cuts and tax hikes are necessary to ensure the country's survival.

NPR's Sylvia Poggioli reports from Athens.

SYLVIA POGGIOLI: Greeks are accustomed to taking to the streets to protest, and tens of thousands are marching today. But in the last few days, the mood here was subdued as Greeks wait for the international verdict on whether the country should be bailed out by its European partners. Everyone already knows that drastic conditions will be an added blow to the deep recession.

Demetrius Sakapapolous(ph) is doing inventory in his empty paint shop.

Mr. DEMETRIUS SAKAPAPOLOUS: (Paint Store Owner)(Through translator) I think measures are necessary, of course, but for the average Greek, like a pensioner who makes 600 euros a month or who makes a salary of 700 euros a month, these are devastating. People cannot afford to cut more than they have already cut.

Mr. COSTAS PANAGOPOULOS (ALCO Polling Agency): More than 60 percent said that they cannot accept new austerity measures. Of course we have no choice.

POGGIOLI: Costas Panagopoulos runs to the ALCO Polling Agency. He says that despite widespread anger, the government has a big asset in its prime minister. He's still widely popular.

Mr. PANAGOPOULOS: Papandreou is probably the only politician who still can communicate with people. They trust him quite a lot.

POGGIOLI: He'll need that trust when he tells Greeks they have three very meager years ahead in order to cut the deficit by 10 percent. Wages in the huge public sector are expected to be frozen. Two months of bonuses will be eliminated and taxes will be raised on gasoline, tobacco and alcohol. Hundreds of outdated state agencies will be closed.

Gikas Hardouvelis, chief economist of Eurobank, says the public sector has swollen to the point of costing Greece more than 50 percent of its GDP.

Mr. GIKAS HARDOUVELIS (Chief Economist, Eurobank): The public thought of the public sector as a sacred cow. It's there for them to get benefits. They never thought they had obligations towards the public sector. Politicians behave in a similar way.

POGGIOLI: Some economists describe the elephantine Greek public sector, and the maze of rules and regulations that fortify it, as a Soviet-style economy. Wasteful perks are rampant. Tens of thousands of unmarried or divorced daughters of civil servants collect their dead parent's pensions. Some civil servants are paid extra for using a computer or for speaking a foreign language.

And early pensions go even to so-called hardship jobs in the private sector, such as hairdressers, musicians and even TV and radio anchor people allegedly at risk from bacteria in their microphones.

Economist Yanis Sturnatas(ph), a former government advisor, goes so far as to hail the new austerity measures as a golden opportunity to eliminate waste and finally modernize the economy.

Mr. YANIS STURNATAS (Economist): We think that the GDP will grow by 15 percent in five years, and productivity by 10 percent.

POGGIOLI: Many other economists worry that the drastic cutbacks may further delay economic recovery and endanger Greece's ability to repay its debts. Yet economist Hardouvelis of Eurobank says Europeans may be reluctant to help Greece but they have much at stake that it avoid default.

Mr. HARDOUVELIS: Because they own Greek bonds. The Greek fiscal debt is not in Greek hands. It's in German hands, it's in French hands, in Belgian hands, in Swiss hands, in Scandinavian hands. It's not in Greek hands. So these people have an incentive to make sure that Greece floats.

POGGIOLI: Sylvia Poggioli, NPR News, Athens.

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