Greece comes to a standstill as unions turn against PM Tsipras

A poster outside the Bank of Greece in Athens calls for a nationwide 24-hour strike.
A poster outside the Bank of Greece in Athens calls for a nationwide 24-hour strike.PHOTO: EPA

ATHENS (BLOOMBERG) - As Greek workers take to the streets in protest on Thursday (Nov 12), Prime Minister Alexis Tsipras will for the first time be on the other side of the barricades.

Unions - a key support base for his Syriza party - will chant the same slogans Mr Tsipras once used against opponents. Doctors and pharmacists will join port workers, civil servants and Athens metro staff in Greece's first general strike since he took office in January, bringing the country to a standstill for 24 hours.

ADEDY and GSEE, Greece's biggest unions, have called for a rally at 11am local time, accusing Mr Tsipras of bowing to creditors and imposing measures that "perpetuate the dark ages for workers".

The 41-year-old Greek premier, who was among anti-austerity protesters in previous general strikes, is now racing to complete negotiations with creditors on belt-tightening in exchange for the disbursement of 10 billion euros (S$15.26 billion) to be injected into banks. Failure to reach an accord with euro-area member states and the International Monetary Fund on policies including primary residence foreclosures, and stricter rules on overdue taxes, would put the solvency of the country's lenders in doubt.

"The economic policies Tsipras has to implement are definitely harsher than warranted, and also harsher than they would be if it wasn't for these seven months of brinkmanship and extreme political uncertainty," said Prof Manolis Galenianos, a professor of economics at the Royal Holloway, University of London. "This wasn't necessary, it could have been avoided, and the government will now implement deeper cuts to achieve less ambitious fiscal targets."

The former firebrand opponent of bailouts was catapulted to power this year on a promise to end austerity, only to capitulate to creditors' demands after the freezing of aid from the euro area brought the country's financial system to the brink of collapse, forcing Mr Tsipras to impose capital controls.

Greek banks now need to raise 14.4 billion euros to stay afloat, amid increases in bad loans, subdued economic activity, expensive emergency funding requirements from the European Central Bank, and strict limits on capital transfers. Most of the money will come from emergency loans under Greece's latest austerity-attached bailout agreement.

Greece's Parliament needs to reduce protection of indebted homeowners "quite a bit more", according to German Finance Minister Wolfgang Schaeuble, and overhaul bank governance rules, before the country is eligible for funding to recapitalise its banks. Mr Tsipras's government has less than a week to comply, and the Prime Minister told his ministers on Tuesday that concluding negotiations with creditors is a top priority.

More belt-tightening will be required before Europe's most indebted state gains access to additional emergency loans to cover its budget needs next year, and creditors agree to ease its debt burden. GSEE union of private sector workers says those measures will bring "punitive austerity, poverty and impoverishment" to a country where about a quarter of the workforce is without a job.

"There's a risk of social explosion, as pension cuts and tax hikes loom," said Ms Sotiria Theodoropoulou, a senior researcher at the European Trade Union Institute (ETUI) in Brussels. "Last summer's shock took a toll on many sectors, and it's difficult to see where growth will come from."

Mr Tsipras himself had accused previous governments for following "an obedient pupil" strategy towards creditors.

In a statement issued after last November's general strike, the then-leader of the opposition said the government's bailout policies amount to "vassalage" and "servitude," to unreasonable policy demands by the Troika of the European Commission, the ECB and the IMF. On Tuesday, he told his ministers that the government will implement its agreement with creditors.

For ETUI's Theodoropoulou, Greece runs the risk of destabilising stagnation, as the lack of capital for investment, steep internal devaluation, and persistently high unemployment have damped its growth prospects.

"Greece's economy is at risk of what economists call hysteresis, as prolonged unemployment has undermined its potential output," she said.

Eliminating political uncertainty, instituting a stable tax regime, and improving the effectiveness of welfare benefits would go a long way towards alleviating the social cost of the crisis, she added.

"Greece needs a plan, and a consensus on a vision about its future following social dialogue," she said.