Saturday, July 2, 2011

Outrage and disenchantment in Greece ahead of austerity vote

The upstart crowd camped out on Syntagma Square in front of the Greek Parliament is like no other in Greek history. Yes, it is rough around the edges. No, it does not have solutions to the years of debt and corruption that have Greece near default. Yet since May 24, the movement organized through social media has continued to swell and turned heads as a new voice of the people, the power of the Greek powerless.

Critically, it is largely nonviolent. On Tuesday, however, the violent fringes smashed windows and drew shots of tear gas from riot police. But this protest movement has been one of baby strollers and roasting corn rather than molotov cocktails, skinheads, or communist red flags. The only flag is Greek. Trotskyites and Orthodox priests tolerate each other. The usual anarchists and fascist suspects lurk only on the margins.

By mid-June, the gathering – a crazy quilt that shares elements of a tea party caucus, the Arab Spring, an antiglobalization rally, and a Haight-Ashbury commune – had become the largest social movement in Greece since martial law in 1974. These aganaktismenoi, or so-called outraged, earned enough public credibility to nearly end the government of Prime Minister George Papandreou on June 15 as it sought €28 billion ($40 billion) in new austerity cuts.

IN PICTURES: Greece protests

On Tuesday, public workers began a two-day strike to protest the austerity package that Greek parliamentarians are expected to vote on tomorrow. The deal would clear the way for Greece to receive European Union and International Monetary Fund loans to avoid a default on its sovereign debt. Brussels has taken a hard line, insisting that Greece will default unless it adopts more austerity cuts, including tax hikes, spending cuts, and privatization of government services.

Other peaceful citizens' movements – called "indignants" – have emerged in Spain, Portugal, and Italy. A common theme is skepticism about elite politicians, and skepticism about European Union policies that view austerity as the only way to growth and solvency.

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In Athens, on the sun-drenched square, the Greek protesters may prefigure deeper currents of disenchantment among rising populations of educated, but jobless young people who find something missing in the dream of Europe that burned brightly a decade ago. Many here speak of their protest in terms of an "awakening," or as a new effort to "find the truth."

The 'indignants'

The improbable inspiration of the movements is a 93-year-old French Nazi resistance hero, Stephane Hessel, who came out of retirement last year to write a bestseller titled "Get Indignant!" that laments the loss of ideals and idealism in Europe, arguing that young people should not accept a future predetermined to be bleak and constricted. What's unclear is where the new movements will go.

George Stefanatos, a graphic artist, has come to Syntagma Square, an acre of palm trees and evergreens, every weekday since May 24. "I'm here because there is a deeper crisis of ourselves and our society. We've been closed in our houses, sitting on our couches, watching TV. No one questioned anything; it wasn't healthy. But I think we are waking up. We have started talking with each other. That's why I am here. We are talking about the economy but really we are talking about many other things."

Loukas Tsoukalis, director of the Hellenic Foundation for European and Foreign Policy, says the dynamics date to the 2008 economic crisis: "The bursting of the economic bubble is leading to substantial changes in many countries; it is shifting the tectonic plates and we are seeing new forces. In Sweden and Finland we've had the election of nationalist parties unimaginable a few years ago. What is common is anger at political elites. In Greece we see a challenge to established parties – but which way it will go we don't know."

Teetering on edge of default

The big issue remains the deep austerity cuts, adding to last year's cuts after Greek leaders revealed public debt of $350 billion. That threw Europe into a stark moment of soul-searching and an eventual bailout or "stability fund." Greece now needs a second deal and austerity is required by the EU for Greece to receive the $12 billion loan by July 15 – or face bankruptcy.

Having tremulously survived a June 21 confidence vote, the Papandreou government, armed with a new and influential finance minister who had been the prime minister's chief rival, still faced passing austerity cuts on June 28.

The possibility of a Greek default – with untold consequences for the world economy – has suddenly and powerfully seized Europe's attention. And as the crisis continues to unfold, fingers are pointing in every direction.

European officials are gnashing their teeth, irritated that a small southern nation making up 2.5 percent of Europe's gross domestic product could trigger a genuine crisis. US Treasury Secretary Timothy Geithner called out Europe's leaders on June 21 for a lack of decisive action to quell a dangerous default at a time when global recovery is fragile. Oxford University's Timothy Garton Ash says the problem is a flagging ardor in Germany for the European project, and that Chancellor Angela Merkel must explain to a skeptical public why it is in Germany's interest to put its mighty weight behind a deal to calm the markets.

SOUND OFF: What lessons from the Greek debt crisis can the US learn and apply to possible debt solutions here?

Corruption and overspending

In Athens, despite charges of collective denial in many quarters, there is a strong awareness that the nation overspent and is corrupt from top to bottom, as Mr. Papandreou has said openly. A store clerk argues, "We need to change our mentality. Those Greeks that say they can't find a job are not entirely honest. You can find a job if you try. I don't buy the excuses."

Reform-minded experts such as Takis Pappas at the University of Strasbourg in France say Europe has no option but to bail out Greece or let it default, and default is a "catastrophic option." At the same time, Mr. Pappas argues that "Greece is blackmailing the EU and I don't like this. They see there is no alternative. What we need instead is a bridge between austerity and growth."

A key conundrum is that in forming the EU after German reunification, Europe agreed to a common currency. But it did not forge a common political union, and common fiscal and banking policy that would oversee affairs. The Greek crisis is an example of the problem of what is often called a "fair weather" union that chugs along swimmingly in good times, but now faces storms.

In Greece, nearly 1 million out of a population of 11 million receive some kind of state salary. The Greek debt is a public spending debt. Yet cuts last year and economic decline have dried up the extra jobs and renowned extended Mediterranean family support.

"Last year my parents gave money to my children," says economist Leonidas Vatikiotis, a consultant on the film "Debtocracy," a popular documentary about the Greek crisis. "This year I'm giving money to my parents."

Outraged in Greece

One reason the "outrage" protesters get credence is that their rank and file are mostly outsiders – too young or too poor to have achieved any state spoils or patronage. They are seen as those carrying the burden of tax hikes and job cuts. They are not part of a sizable cohort angry about bad management and an end to a spigot of jobs, early pensions, stuffed corporate envelopes, or trade union payout. When crowds grow in the square – a group that walked from Sparta was welcomed with roars – there is a palpable upwelling of pride. ("The outrage movement has achieved such a status of virtue that everyone is afraid to criticize it," says a Greek journalist.)

Add to the mix an undercurrent of culture war with northern European states whose press often characterize Greece as feckless or lazy. Ms. Merkel said last fall that it was a mistake to have allowed Greece into the eurozone. On the square, there's a feeling of speaking to other Europeans.

"We are not animals, just people that exist to keep an economy and a finance system grinding on," says Filos, a tall 27-year-old with a Quicksilver-logo T-shirt. He claims to live in a posh suburb with a car and a job: "But I feel a need to come here in the evening. The Greeks don't just exist to consume and buy and sit around in clubs. Our politicians don't acknowledge this. The rich need to pay more taxes," he says, referring to the austerity package's unpopular across-the-board cuts.

While many in the "outrage" movement say they are ready to "leave Europe," the sentiment does not seem to be overwhelming in Greece. Vassiliki, a singer with flowing locks in a traditional Greek band says, "I want Greece to stay in Europe, but with dignity."

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Friday, July 1, 2011

Belarus appeals to IMF for $8bln rescue loan

MINSK, Belarus (AP) — Belarus has asked the International Monetary Fund for a loan of up to $8 billion to stabilize its plummeting economy, the government said Wednesday as it struggles to manage the country's most severe financial crisis since the Soviet collapse.

Prime Minister Mikhail Myasnikovich said the country is counting on striking a low-interest loan deal of anywhere between $3.5 billion and $8 billion. Analysts say at least $9 billion is needed to get the economy back on track.

"This is an SOS signal from the Belarusian government, which is losing control of the situation," said Stanislav Bogdankevich, former head of the National Bank.

Panic spread across the country last week, when the National Bank cut the value of the Belarusian ruble against the dollar almost in half. Belarusians have been rushing to buy up goods and lining up for days at currency exchange offices to get dollars and euros in a desperate attempt to protect their savings.

On Wednesday, the government issued a decree freezing prices on staples such as fish, cheese, tea and coffee and some fruit and vegetables.

The IMF, which issued Belarus loans amounting to $3.5 billion in 2009-2010 to help it weather the impact of the global financial crisis, is studying the country's finances and is expected to produce a report in mid-June.

An IMF spokesperson, Olga Stankova, said the Fund's mission visiting Belarus will "discuss policies that would restore economic stability and put the economy on the path of strong and sustainable growth."

"The mission will use the opportunity to exchange views with the authorities on possible next steps in response to their request for the Fund-supported program," she said in a statement.

Observers pin much of the blame for the country's financial woes on authoritarian President Alexander Lukashenko, who oversaw an increase in social spending before his re-election late last year. The IMF cited that as a key drag on the economy.

Belarus is hoping for a $3 billion loan from Russia but the Kremlin has been dragging its feet, insisting it will lend Minsk money only if the country sells up to $7.5 billion worth of its key state-owned enterprises over the next three years. A decision is expected to be announced later this week.

Russia is reportedly seeking to capitalize on Belarus' vulnerability by acquiring major stakes in energy assets such as Beltransgas, the state-owned gas pipeline network that supplies domestic homes and forwards the gas to Europe. Russia's state energy giant Gazprom already owns 50 percent in Beltransgas, and is demanding the remaining 50 percent as part of the deal.

Russia's Finance Minister Alexei Kudrin warned Belarus last month that it is in no position to turn the deal down because it is ill-equipped to meet the tough terms for any IMF loan.

For most of his 17 years in power, Lukashenko has relied on Russia — Belarus' main sponsor and ally — to maintain a quasi-Soviet economy complete with a social safety net that helped maintain his popularity.

But the Russian subsidies have dwindled recently as Moscow pushes for control over Belarus' most prized economic assets.


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