Wednesday, February 10, 2010

Iran's mullahs are desperately trying to pick a fight with the West to save their own skin

Union and worker strikers vrs. the EU Bailout Plan

Greek Strikes Challenge Papandreou’s Bid to Stop Fiscal Crisis

February 09, 2010
By Maria Petrakis and Natalie Weeks

Feb. 10 (Bloomberg) -- Prime Minister George Papandreou’s drive to get Greece’s ballooning budget under control will be challenged in the streets today as striking labor unions shut down schools, hospitals and flights.

Air-traffic controllers and civil-aviation workers are effectively closing down Greek air space as part of the 24-hour work stoppage by ADEDY, the umbrella group representing about 600,000 civil servants. Some 483 international and domestic flights have been cancelled, a spokeswoman for Athens International Airport, Greece’s biggest, said by phone.

Protests against Papandreou’s plans to freeze wages and reduce benefits come after European Union leaders, set to meet at a summit in Brussels tomorrow, signaled they may aid the country if progress in cutting the deficit is made. Bonds have slumped in Greece and in the euro area’s southern edge as investors examine budget shortfalls across the 16-nation bloc.

“The concern is whether the strike will be a one-off or the first of a long series of street demonstrations involving other parts of the economy,” said economist Giada Giani of Citigroup Global Markets in London. “We need to see a prolonged period of strikes before we know whether the government’s willingness will be affected.”

ADEDY opposes Papandreou’s plans and may call out its workers again on Feb. 24, when the biggest private-sector group GSEE holds its own 24-hour strike. Today’s walkout, with rallies in Athens and other cities and towns, is organized labor’s first major challenge since the Oct. 4 election of Papandreou, a socialist that unions backed in the vote.

Union Threats

“Cutting public-sector salaries is an easy political choice,” Spyros Papaspyros, chairman of the ADEDY civil servants union, said this week. “Attacks that start on the public sector will lead to attacks on all.”

The unions are contesting measures demanded by the EU and investors to reduce a deficit of 12.7 percent of gross domestic product last year to within the EU’s 3 percent limit in 2012. Greece’s fiscal woes have stoked concerns that it may need a bailout and helped spark a rout in global stocks.

Spain and Portugal, also suffering from gaping deficits after the worst recession since World War II, have been sucked into a market selloff that has seen the euro fall to a nine- month low against the dollar on concern that swelling shortfalls will stifle Europe’s recovery.

Bonds Jump

Greek, Spanish and Portuguese bonds jumped yesterday after the EU signaled it may aid Greece. The euro rose the most in more than five months and the Greek 10-year bond yield fell the most since at least 1998.

The premium investors demand to buy Greek debt over comparable German bonds ballooned on Jan. 28 to the highest since 1998 amid concern that Papandreou’s deficit plan relied too much on one-off measures for revenue and not enough on spending cuts.

Olli Rehn, who today takes over as European economic affairs commissioner, said the EU could offer Greece “support in the broad sense of the word.” In Germany, Michael Meister, financial affairs spokesman of Merkel’s Christian Democratic Union, said “we are considering support.”

Hours before the strike, Greek Finance Minister George Papaconstantinou reiterated a hiring freeze for civil servants. He also said in Athens that the government will offer a tax amnesty on funds held abroad in a bid to boost revenue,

While not allowed by law to take part, police, fireman and coast guard workers said they will also join the work stoppage.

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