ATHENS, Jan 20 (Reuters) – Greece’s socialist government must overcome its own fears of popular unrest and impose tough austerity measures quickly while public opinion is supportive to avoid a fiscal fiasco threatening the whole euro zone.
Prime Minister George Papandreou is trying to balance nervous markets and high borrowing costs against social justice, party ideology and a public prone to violent street protests as he grapples with a crisis he inherited from the conservatives.
But analysts say his government’s fears of mayhem may be exaggerated, with opinion polls showing 55-60 percent of people willing to support harsh measures if applied fairly.
“It’s the first time in many years that society is so positive towards such measures,” said ALCO pollster Costas Panagopoulos. “People may not be entirely convinced they will work but they think they are distributed evenly.”
EU peers, worried they may need to rush to Greece’s rescue, are pressing for tough, Ireland-style pay and pension cuts to shrink deficits and the euro zone’s biggest debt to GDP ratio.
But the socialists appear still committed to pledges to tax the rich and help the poor made ahead of October elections, before they discovered the 2009 budget deficit would reach 12.7 percent of GDP, twice as much as previously expected.
HARD HIT BY MARKETS
International markets have hit them hard. The cost of state borrowing and of insuring Greek debt against default have soared, and EU peers have slammed Greece’s credibility, prompting some talk that Athens may have to leave the euro.
In the face of such a crisis, the socialists have sent to Brussels a 3-year deficit-cutting plan that emphasises eliminating waste and increasing revenue rather than seriously cutting public sector pay, for fear of a political backlash.
“The government must take all necessary measures immediately to satisfy the stability plan targets,” said Yannis Stournaras, economics professor and director of the IOBE think tank. “It must move faster, there is no plan B.”
So far, Papandreou has appeared hesitant to push harder, partly held back by the old socialist guard. But ministers speaking anonymously say Greece has no choice but to succeed, and that resorting to an IMF or EU bailout is not an option.
“I don’t even want to think of the EU rejecting our stability and growth plan (in February),” said a senior government official. “That is just a nightmare scenario … we will do whatever it takes.”
Analysts say the government, which enjoys a strong majority in parliament, should apply measures swiftly to produce results fast, both for the sake of markets and public opinion.
People are more likely to continue supporting measures, however tough, if they see their sacrifices are paying off.
“The next three months are critical for the government. If measures start to work, the public will support them. If they don’t, then there will be a big problem with public opinion,” Panagopoulos said.
Unions representing millions of workers have already declared strikes for February but their influence on the public has long waned. More disruption often comes from anarchist groups trailing protest marches and causing damage.
A first test of the government’s resolve has come from farmers, who blocked some highways this week to demand higher produce prices. If the government stands its ground in negotiations, the signal to other unions will be clear.
Memories of angry youths turning Athens into a battle zone in December 2008 over the police killing of a teenager are still fresh. The protests were fuelled by public discontent over a slowing economy and high youth unemployment.
“There will be some reaction but not enough to stop the measures,” said Thodoris Livanios, head of Opinion pollsters. “Unions have been weakened over the past years. The biggest danger comes from grassroots reaction.” In the streets of Athens, people say they are willing to pay the price but also demand punishment for those they blame for Greece’s economic crisis — corrupt politicians. The socialists have already set up committees to investigate the biggest scandals under the previous government.
The conservatives rode a wave of discontent with decades of socialist scandals to win 2004 elections, pledging to clean up Greek politics. But they were soon hit by their own scandals and lost October’s election by a 10 percentage point margin.
“We will accept the measures even if they are harsh, provided they are fair to lower incomes,” said public servant Maria Arvaniti, 40. “But if they are not fair, I will go out on the streets. Those who brought our economy to this disgrace must pay, they must give us our money back.”