ATHENS (Reuters) - Greek Prime Minister George Papandreou starts a campaign on Monday to secure a new international bailout by imposing years of austerity on a nation already seething over corruption and economic mismanagement.
Unease is growing within Papandreou’s ranks about the consequences of waves of budget cuts demanded under successive deals with the European Union and IMF — and this could turn into alarm after at least 80,000 Greeks crammed a central Athens square to vent their anger over the nation’s dire state.
As the government struggles to prevent Greece from defaulting on its debt, the Socialist cabinet will discuss informally on Monday the medium-term economic plan which will impose 6.4 billion euros ($9.37 billion) of extra austerity this year alone.
This is just the first stage of a drive to turn the plan, agreed on Friday with the EU and IMF as the price of a new financial rescue, into law.
Papandreou will then present the plan to the political council of his PASOK party on Tuesday, before the cabinet clears it the following day and sends it to parliament.
Greece’s international lenders have made clear that the new bailout package, which would replace a 110 billion euro deal agreed only a year ago, depends on Athens keeping to its promises for further austerity and accelerated privatizations.
But the government is under huge pressure, not from the hooded radicals who battled police in the early days of the austerity drive, but from ordinary Greeks who are suffering badly under pay and pension cuts and soaring unemployment.
On Sunday night people from Athens and far beyond the capital crammed into the city’s Syntagma Square to show they are close to the limit of their endurance.
“Thieves - hustlers - bankers,” read one banner raised above a sea of splayed hands waved at the parliament building which overlooks the square, an offensive gesture in Greek culture.
Turnout was the biggest so far in a series of 12 nightly rallies inspired originally by Spain’s protest movement.
Police put the turnout at 80,000, but many were stuck in side streets, unable to squeeze into the square, and protesters accuse authorities of routinely underestimating their numbers.
Greeks on modest salaries are furious that they have to pay ever higher taxes in the drive to reduce a towering budget deficit, while they believe the self-employed such as doctors and lawyers are guilty of flagrant tax evasion.
“Instead of going after tax cheats, they are raising taxes and cutting working people’s pay,” said Yannis Mylonakos, 34, who lost his job at an advertising agency and joined Greece’s army of unemployed, which has hit 15.9 percent of the workforce.
No relief is in sight. The medium-term plan aims for a further 22 billion euros in austerity steps in 2012-15.
On Sunday, some banners evoked the Arab Spring movement to oust authoritarian rule. “From Tahrir Square to Syntagma Square, we support you!” read one banner.
Others showed helicopters in an apparent reference to Egyptian President Hosni Mubarak’s flight from Cairo in February after weeks of popular protests on the city’s Tahrir Square.
Papandreou has used his parliamentary majority to ram through successive rounds of austerity. But faced with the popular anger, some PASOK lawmakers are becoming uneasy.
A group of 16 wrote to the prime minister on Thursday demanding a full party debate on the medium-term plan as “a matter of patriotism and democracy.”
But Interior minister Yannis Ragousis warned that rocking the boat could lead to early elections. Opinion polls suggest this would produce a political stalemate, raising the risk that the new bailout deal with the EU and IMF might unravel.
“Anyone who drives the nation toward elections now will be effectively giving it the last push over the cliff,” Ragousis told Sunday’s edition of the Realnews newspaper.
Greece’s first, 110 billion-euro, bailout assumed that it could resume borrowing commercially early next year. This now appears inconceivable, meaning a new package is vital.
Jean-Claude Juncker, who chairs meetings of euro zone finance ministers, indicated that commercial creditors must share some of the cost of Greece’s huge funding needs.
The ECB opposes any attempt to cut the overall value of creditors’ bond holdings, known as a haircut, fearing this would badly hurt banks which hold Greek debt and provoke a violent reaction on international financial markets.
However, creditors may be asked to buy new Greek bonds when old ones mature, to avoid Athens having to produce more money.
Additional reporting by Erik Kirschbaum in Berlin; Writing by David Stamp; Editing by Jon Hemming