The Wall Street Journal
By ALKMAN GRANITSAS
THESSALONIKI, Greece—Prime
Minister George Papandreou vowed Saturday that the country would meet its
budget targets and press ahead with difficult reforms, even as thousands demonstrated
against those reforms on the streets of Greece's second largest city.
His remarks came as Greece's
embattled government is scrambling to cut public spending and step up its
reform drive after receiving stark ultimatums from other euro-zone governments
that further rescue money will be withheld if Athens doesn't deliver on
promises
"Even if the recession
this year is appreciably bigger than the original forecasts…Greece will meet
its fiscal targets doing all it has to do," Mr. Papandreou said.
Earlier this month, talks
between Greece and a visiting troika of officials from the European Commission,
International Monetary Fund and European Central Bank--who were in Athens to
assess the country's eligibility for fresh aid-—were suspended in a spat over
whether Greece would need to take further measures.
Without the aid, Greece is
expected to run out of money within weeks, according to senior Greek officials.
Clashes broke out Saturday
between riot police and demonstrators as thousands of Greek workers, students
and ordinary citizens took to the streets of Thessaloniki to protest government
overhauls. Demonstrators hurled projectiles at police, who responded by firing
tear gas
Police said that more than
17,000 people were taking part in the demonstrations and that they had detained
94 people and made at least two arrests relating to the protests. At least one
person was reported hurt in the clashes.
The demonstrations include at
least a half-dozen separate protests and include rallies by Greece's two major
umbrella unions—private-sector GSEE and its public-sector counterpart ADEDY—and
the communist-backed labor union PAME. Also joining in the protests are
students angered about education changes, other left-wing groups, as well as
Greece's new grassroots movement of self-styled "Indignant" citizens.
More than 5,000 taxi owners were part of the demonstrations to protest plans to
liberalize their sector.
In May 2010, Greece narrowly
avoided default with the help of a €110 billion ($150 billion at today's exchange
rates) bailout from its fellow euro-zone members and the IMF in exchange for
tough budget and economic overhauls.
Saturday's protests came amid
a wave of walkouts planned by a number of workers—ranging from taxi owners to
doctors and tax collectors—in coming days against the government overhauls.
"Everyone is turning the
screw," said David Lea, an analyst at Control Risks, an independent risk
consultancy. "There is a gradual loss of confidence across Europe in
Greece's ability to deliver on its reforms. At the same time, with increased
tensions within [the ruling Socialist party], sooner or later the government is
going to face a fresh rebellion again."
To meet the demands of its
international creditors, who are due to resume an inspection visit in Athens
next week, the government is now looking at unprecedented public-sector layoffs
and cuts in civil-service perks.
Specifically, Greece is
looking at eliminating as many as 120,000 public-sector workers, either through
layoffs or placing them in a reserve labor pool at reduced salaries for up to a
year, according to Greece's government spokesman. After one year in the labor
reserve those workers, barring any transfers to new government jobs, will be
laid off altogether. The government also is looking to streamline and reduce
public-sector salaries by eliminating special benefits that make up a quarter
or more of civil servants' pay.
But the moves threaten to
upend decades of cozy ties between the ruling Socialist party and public-sector
workers who have long formed a core constituency. Earlier this week, nine
Socialist lawmakers criticized the plan in a letter sent to Greece's ministers
of finance and public administration.
Reacting to the plan,
tax-office employees and customs officials are also scheduled to strike on
Monday and Tuesday over cuts to benefits, while teachers have called a walkout
for Sept. 22.
Separate protests are planned
next week by Athens garbage collectors, while doctors already have staged one
48-hour strike over health-care overhauls, and taxi owners are planning a
second 24-hour strike Saturday over moves to liberalize the sector.
In preparation for the
protests, police locked down the city center, banning all traffic and erecting
metal barricades to prevent protesters from storming the grounds of the
Thessaloniki International Trade Fair where Prime Minister Papandreou delivered
his speech.
"The protests this year
seem likely to be much bigger than in any past year," said one police
official in the city. "But the situation in Greece is very difficult so
there are more things to protest about."
On Friday, Greek police,
firefighters and ambulance workers are due to hold a protest rally in
Thessaloniki.
Write to Alkman Granitsas at
alkman.granitsas@dowjones.com
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