September 12, 2011
Greece outlined fresh budget cuts this weekend, but some members of the German government in Berlin are nonetheless speaking openly about the possibility of a Greek default and the country's departure from the euro. German media commentators say doubts about Athens' reform pledges are justified, but that an insolvency is far riskier than providing loans.
Greek Prime Minister George Papandreou held another speech on Saturday vowing to forge ahead with budget cuts and structural reforms to qualify for the continued payout of aid from its euro-zone partners and the International Monetary Fund (IMF). His government followed up the pledge on Sunday by introducing a new tax on real estate to raise about €2 billion ($2.7 billion) by the end of this year to help meet the 2011 budget deficit target, estimated at around 8.1 percent of gross domestic product. The government also announced plans to speed up privatizations and lay off public-sector workers.
"We decided to fight the battle to avoid a disaster for the country and its people and to stay in the euro," Papandreou said in his annual economic speech at a trade fair in the northern city of Thessaloniki. "Any delay and wavering is dangerous for the country." Outside, more than 20,000 protesters gathered to demonstrate against cuts. Police fired tear gas at youths smashing shop windows and setting fires on the main shopping streets.
German media commentators say Papandreou has held such firebrand speeches before, and then failed to deliver on his promises. The budget goals Greece agreed with the European Union, the European Central Bank and the IMF look increasingly out of reach because the Greek recession is worse than expected. The government revised its 2011 GDP forecast to a decline by 5.3 percent from an earlier projection of a 3.8 percent fall.
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