The reactions to Greek Prime Minister George Papandreou's government announcement of 4.8 billion euros in new austerity measures were predictably strong, divisive, and foreshadow continued social strife and economic turmoil in Greece through 2010.
The Greek 10 year bond issue, being completed at approximately 6.40%, is a good sign of progress in alleviating the liquidity crisis, but will contribute only 5 billion euros less fees, or about a quarter of Greece's $20 plus billion short-term liquidity needs, to May.
The Greek stock market General Index rose 1.57% to 2,045, and the National Bank of Greece (NBG) extended a week long relief rally to 15.15 euros before backing off to 14.90, up 1.3% on an impressive 4 million shares traded. Other Greek banks had smaller gains.
Ironically, the newly installed socialist PASOK government is the one cutting public spending and social benefits are now the enemy of the unions, once their traditional support base.
The recently-ousted Conservative Nea Democratia party is decrying the spending cuts and increases in VAT taxes, saying that the government should have acted more quickly to detect the fiscal imbalances.
ND Party leader Antonis Samaras said "the measures are not a salvation mixture for the economy, but paralyze it and injure the social fabric".
One wonders exactly in which month, between February 2010 and their election last October 2009, should the PASOK government have detected the spending overrun and budget deficit inherited from their predecessors?
Enthusiasm for a resolution of the "Greek Problem" must be tempered by realism for Greece's prospects going forward. Things will be tough, both socially, and economically.
We can expect more public and private union strikes this year, and with greater intensity. (The next one scheduled for March 16.)
Once the winter wet season ends, the forests of Greece will again become a target for arsonists, another traditional but cowardly way anti-government sentiment is expressed in this country.
The Greek government announced an increase in the VAT of two percentage points, to 21%. They also announced a 30% cut in the bonuses public sector employees are traditionally given for Easter, Summer and Christmas.
Disposable income for Greeks will be diminished, and a domestic recession will no doubt be the result.
Pictures of white-haired Greek seniors rioting on the palace steps add a comic turn to the confrontation, as inflation-indexing of their pension benefits are frozen and retirement ages for benefits are extended.
Critical to Greece's finances are a healthy spring, summer and fall tourist booking season. The union actions will be aimed at frightening away the tourist trade.
On the other hand, the large Greek merchant marine/shipping industry is flagged largely offshore and beyond domestic taxation jurisdiction, and will continue to thrive as the global economic recovery continues.
Here is a compilation of today's headlines from Greek newspapers, courtesy of the Athens News Agency/Macedonian Press Agency.
(One can clearly ascertain the political leaning and ownership of each newspaper.)
ADESMEFTOS TYPOS:
Be strong! At last, the austerity measures were announced.
APOGEVMATINI:
God help us - Greece faces a crucial turning point in its history - Foreign officials approve of the measures but do not assist.
AVGHI:
Rage over the looting - Severe attack against the civil servants' income - Now it is the private sector's turn.
AVRIANI:
Painful sacrifices without substance.
ELEFTHEROS:
Suffocating measures for households and markets.
ELEFTHEROS TYPOS:
The 13th and 14th salary in the private sector is now targeted.
ELEFTHEROTYPIA:
Unforgettable day! Storm of measures changing our lives.
ESTIA:
Storm of measures without prospect - The state is strangling the economy.
ETHNOS:
Severe austerity in salaries and storm of taxes.
IMERISSIA:
Tough adjustment for all.
KATHIMERINI:
Harsh measures instead of bankruptcy.
LOGOS:
Shock and awe over the new measures.
NAFTEMPORIKI:
Unprecedented measures aiming to save 4.8 billion euros.
NIKI:
One step forward and two steps backward - The powerful Greece of the Olympic Games does not exist any more.
RIZOSPASTIS:
Protests on Thursday all over the country against the 'burning' measures.
TA NEA:
Shock! The most painful measures the antidote to bankruptcy - Devastating austerity for all.
TO VIMA:
Everyone must become poorer to avoid bankruptcy - Unprecedented storm of measures.
VRADYNI:
The market will be devastated - VAT increase brings painful consequences to market.
Expect German Chancellor Merkel, tough talk aside, to help the Greeks with additional liquidity at the upcoming meeting.
The prospect of the Greek credit contagion spreading to Spain, or even the UK, is too grim to fathom.
The market upshot of this is a stronger euro currency versus the USD (ERO), and a shot in the arm for USD-priced commodities and North American stock markets, which have already rallied on the prospects for a resolution.
Disclosure: No positions
