February 3, 2011
Greece’s prime minister, George Papandreou, claims that his country has clawed back credibility with the markets after nine months of austerity. His economic team suggests Greece may be able to borrow again, despite its “junk” rating. They are cheered that the payback period for last year’s €110 billion ($150 billion) loan from the European Union and IMF is being extended, perhaps to 30 years, and the interest rate cut.
Yet ordinary Greeks are not happy. From pharmacists angry at losing their 35% profit margin on prescription drugs to train drivers facing mandatory transfers to other jobs, resistance to reform is stiffening. A daily list of strikes and protests appears on local websites. And middle-class professionals are just as cross. Doctors staged a sit-in at the health ministry this week because they had not been consulted over health-care cuts. Walk-outs by lawyers, architects and civil engineers loom as the finance ministry draws up a law to abolish their professional privileges.
More pain is certainly on its way. Unemployment, now at 13.5%, is forecast to hit 15%. The economy could shrink by 3.5% this year, after an estimated 4.2% contraction in 2010, according to KEPE, a state-run research institute. Investment is on hold; a new incentives law has been delayed, and banks are reluctant to lend so long as Greece runs the risk of default.
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