Greeks face harsh truth: Worst is yet to come (News Feature)

By Christine Pirovolakis Feb 11, 2010, 13:36 GMT

Athens - As the financial crisis sweeps through Greece and other European countries, Greeks face the grim truth about their already struggling economy: the worst is yet to come.

While European Union leaders laid out the foundation for a financial bail-out of Greece at a summit in Brussels designed to avert a broader crisis in the 16-nation bloc that shares the euro, people in Athens could be seen scrambling for receipts.

'People are now demanding receipts,' Konstantina Misitroni, 57, who runs a bakery in central Athens. 'They want to be taxed less because they finally understand that they have been hit by the crisis and there are difficult days ahead.'

The government hopes that by forcing ordinary citizens to collect receipts in order to claim a standard income tax-free allowance that was previously granted automatically, it will flush out corruption and fight tax evasion as it scrambles for resources to narrow the huge budget gap.

Athens is trying to slash expenditure and raise revenue to reduce its 12.7 per cent deficit, which is more than four times the permitted eurozone limit.

Fears of default in Greece and other struggling European countries have caused nervousness in financial markets around the world in recent weeks.

But Greek Prime Minister George Papandreou's proposals for deep spending cuts to rein in the deficit have met with resistance.

Civil servants staged the first big strike against the government's austerity plans, bringing public services and flights to a halt across Greece earlier this week. More strikes involving private and public sector workers are scheduled on February 24.

But a protest march in the Greek capital and the northern port city of Thessaloniki on Wednesday was thinly attended as opinion polls show most Greeks are willing to pay a price to resolve the financial crisis if austerity measures are perceived as fair.

'The seriousness of Greece's situation seems to have affected even those against the government's solution,' said 40-year-old lawyer Kostas Behrakis.

'People are finally giving in and are realising that things have to change.'

Indeed, even many of those protesting said they realised that they needed to make sacrifices, or risk the country, 'falling off the edge of the cliff,' as the prime minister said last week.

'I am not proud that I am out here striking but I do not want the retirement age to go up to 65,' said 58-year-old Angeliki Dimopoulou, fearing that an added fiscal burden could reduce her retirement benefits.

'I understand that what I am doing is a long-shot and that this time around no one will listen.'

Unlike previous years where farmers received subsidies after stand-offs with the government, this year farmers have spent weeks on blocking roads with no promises of handouts.

'We are determined to make changes and we have asked everyone to contribute to this,' the prime minister has repeatedly said.

Since the ruling Socialists disclosed that the country's finances were in much worse shape than initially believed last autumn, markets have punished Greece, doubting that the government would implement the necessary stringency measures.

The government's measure include hiking taxes, cutting benefits for the public sector, introducing a higher gasoline tax, cracking down on tax evasion and reforming the country's generous but underfunded pension system.

'We are ready to take any necessary measure in order to make sure that the goal of cutting our deficit by 4 per cent in 2010 to 8.7 per cent of our GDP is achieved,' Papandreou said after meeting with French President Nicolas Sarkozy on Wednesday.

Athens needs to borrow about 53 billion euros this year to cover its budget deficit and refinance fast-approaching debt.

Across the country, radio commentators said the economic problems had exposed a general ignorance about the harsh realities of the global economy.

'The fairytale is over - Greeks, it is about time that you know what the rest of Europe and the world has been suffering,' said one commentator at a private radio station in Athens.