Bonds News

In political wreckage, Greeks cling to euro

(This is the first of a short series of stories from some of the eurozone’s weakest countries)

* Greeks blame weak governments for financial crisis

* Want to stay in euro even if it means tough measures

ATHENS, Dec 11 (Reuters) - Outside stores damaged or barricaded against two days of riots, Greeks blame a stream of weak governments for plunging their country into financial crisis, and some hope Europe can take control of their finances.

Where five years ago was euphoria from hosting a successful Olympic Games, Greece’s first recession in 16 years has brought violent street protests that turn the capital into a war zone. Police fight youths who are angry they can see no future.

“Greece’s previous governments did nothing, nothing, nothing for us citizens,” said advertiser Anna Malliou, 40, standing outside a damaged jewellery shop. “I feel Greece, the country which I adore, is defenceless. It hasn’t helped me, or my 23-year-old son, or the new generation.”

As ratings agencies downgrade their assessment of the country’s credit-worthiness, and huge deficits and a ballooning debt threaten to push it into bankruptcy, most Greeks find comfort in one achievement -- joining the euro zone in 2001.

“Thank God for the euro. If we didn’t have the euro we would be lost,” said Christos Papaioannou, 33, against blaring pop music in the central Athens music store where he works. “The EU has to realise that one of its members is in difficulty and this could create a domino effect. We are not alone -- Spain and Ireland are like us.”

His shop windows repeatedly destroyed in riots, he installed steel shutters over but has seen business decline, as have many others lining the main Stadiou and Panepistimou avenues.


The global crisis hit Greece’s key tourism and shipping sectors hard, pushing unemployment to 9.1 percent in September. A construction boom has left 180,000 homes unsold on the market and consumers stuck with loans they find hard to pay.

Fitch on Tuesday cut its rating on Greece to B for the first time in 10 years, making Greek debt the only country’s in the euro zone to rank below A grade.

“I think that all the previous governments are responsible for this situation. They did not have the guts to impose austere measures because they cared most about the political cost,” said Takis Zamanis, chief trader at Beta Securities.

The conservative New Democracy party rode discontent with nearly 20 years of Socialist corruption to win elections in 2004. But it was voted out in October under the weight of its own scandals and the global economic crisis.

Repeated warnings from Brussels and economic organisations to tackle reforms in social security and boost competitiveness were ignored for years as the economy grew by 4 percent annually, a pace many thought would last forever.

Most Greeks believe replacing the drachma with the euro has saved Greece from possible collapse. Political parties, business leaders and ordinary people are unanimous that Greece must stay in the euro zone.

“If we had not been in the euro zone, we would be part of the Third World now,” said Costas Rantzos, 40, a chemical engineer for a dairy factory in the northern Greek city of Drama. “There are no rampant currency devaluations any more, like the ones we used to have before we joined the euro.”


The new Socialist government won elections on pledges to revive the economy, tax the rich and help the poor. But barely two months in office it was hit by ratings agencies questioning its ability to cut a budget deficit estimated at 12.7 percent of GDP, twice as big as the conservatives had reported.

“The largest part of the blame lies with the previous, conservative government. The deficit multiplied under their watch,” Rantzos said. “But I am not convinced either by what the new Socialist government is doing to amend the situation. All I am hearing is statements and announcements. I see little in the way of specific measures.”

The socialists have vowed to deal with the crisis by cutting public sector waste and submitting a tight 2010 budget, but have failed to convince EU partners, who proposed tougher measures like the ones Ireland adopted.

Jean-Claude Juncker, chairman of the Eurogroup of euro zone finance ministers, said on Wednesday Greece would not go bankrupt and so would not need help from EU states.

But many Greeks say they would not mind having economic policy dictated by the European Union, even if it means harsh measures, rather than resort to the International Monetary Fund.

“I would not mind being controlled by the EU Commission. One way or another, there is already a kind of intervention,” said Tina Baka, 36, a civil engineer working for the state urban planning authority.

If tougher measures are taken, the people affected the most would be civil servants like Baka. Greece will have to cut generous pensions and handouts to a bloated and ineffective public sector if it wants to cut deficits.

“I believe that Greece’s biggest problems are tax evasion, Greeks’ favourite sport, and the previous governments’ failure to contain public spending,” said political analyst Thodoris Livanios.

“The new government has included some measures in its agenda but these measures need time to be enforced and the government needs to maintain its political will.” (Additional reporting by Harry Papachristou, Writing by Dina Kyriakidou, Editing by Sara Ledwith)