Euro crisis: Greek despair over deeper cuts

BBC

From Gavin Hewitt

… Many Greeks are in despair…

… The bigger question relates to the Greek economy…

… As far as Brussels is concerned the object is to buy time…

Last night witnessed Greek rage. At least 45 buildings were burned in the capital, 150 stores looted or smashed.

The violence sends a clear and unmistakable message to Brussels: they cannot bank on the new measures being implemented.

Many Greeks are in despair. They are against further austerity and yet they fear the unknown, bankruptcy and exclusion from the eurozone.

Late on Sunday night the parliament voted to support the new spending cuts. It was a vote that revealed just how divided Greece is - 43 deputies rebelled.

On the streets there was fury, some of the worst violence in a long history of protest. The disturbances this time spread to cities away from the capital.

Europe's leaders will now push on towards a meeting of finance ministers on Wednesday. The expectation is that they will approve a second bailout for Greece worth 130bn euros ($170bn; £110bn). Without the extra funding Greece would face a default on 20 March, when Greece has to find 14bn euros.

This is not the deal that was envisaged, however. Both EU and IMF officials intended this second bailout to end the Greek crisis. The plan was to put the country on a sustainable path, with the target of reducing the debt to GDP ratio to 120% by 2020.

That will not be reached without eurozone countries, once again, having to find extra funding - perhaps 15bn euros or more.

Certainly the fact that private investors will take losses on their Greek investments of up to 70% will reduce the debt mountain by about 100bn euros.

That deal is almost in place, although some uncertainty remains.

The bigger question relates to the Greek economy. It is shrinking for the fifth year. Businesses are closing, unemployment rising. The poverty on the streets of Athens is visible. The mood in the country is sullen and resentful. There is intense dislike of the EU, the IMF and the Germans.

A campaign is starting to boycott German goods.

What incenses people is the humiliation. Negotiations with Brussels are seen as negotiating the terms of surrender.

Political uncertainty

Even some of the politicians who urged a vote in favour of the new measures do not believe in them.

The politician leading in the polls, Antonis Samaras, believes that austerity is locking the country into a cycle of decline. He wants a spring election. Europe's leaders want his signature on a piece of paper pledging that he will continue with the spending cuts if he becomes prime minister.

Government officials say that in a couple of years there will be a budgetary surplus - if interest payments are excluded. Some say that in two years some of the reforms will begin to make the economy more competitive. Perhaps. There is a real chance that the Greek economy will decline, further undermining the plan that lies behind the bailout.

As far as Brussels is concerned the object is to buy time, to prevent a default and the risk it might undermine other economies. That might be achieved but Greece remains unstable.