Greeks struggling to see hope ahead of summit (News Feature)

By Christine Pirovolakis Mar 24, 2010, 13:37 GMT

Athens - The Greeks have an old saying: 'hope dies last.' But one of the most difficult things to come upon in the country's ancient capital these days is a shred of optimism.

As speculation continued to mount about whether Germany will participate in a rescue package for debt-ridden Greece, many Greeks have expressed fears about what role, in any, the International Monetary Fund might play in any European Union response.

'Decision-time for euro help,' read the headline in the daily Ethnos newspaper, while Apogevmatini's front page ran 'Setting off the alarm for Greece.'

The IMF has never rescued a eurozone member and many Greeks fear that if the international lender were called in it would result in mass public sector layoffs, a further freezing of public sector wages, placing a cap on pension payments and postponing social benefits.

'If the IMF were to come here, then that would mean the end for us,' said public servant Dimitra Tavrou, adding 'there is talk that nearly 200,000 civil servants would be immediately fired.'

Europe is split over IMF intervention for Greece, with the 16 states of the eurozone divided over how to react if Greece defaults on its debts. Nearly all are desperate, however, to reach a deal so that they do not undermine their own appearance of unity.

'If as member of the eurozone turns to the IMF, it could be interpreted internationally as meaning that our institutions, our framework is too weak,' the designated vice-president of the European Central Bank, Vitor Manuel Constancio said Tuesday.

Greek officials also stressed they were looking for a European solution and would consider seeking IMF help only as a last resort if eurozone support was not forthcoming.

'We want a European solution,' George Papandreou told an international conference in Athens.

Greece needs to refinance some 20 billion euros (26.7 billion dollars) in maturing debt between April 20 and May 23 and is hoping that a public display of an EU emergency support mechanism, which would not need to be activated, will be enough to force down the cost.

Athens is currently paying about twice the interest rate Germany is paying to refinance maturing debt.

'Greece is not going to the EU summit begging. There must be a politicial mechanism in place to ensure the stability of the euro zone and to support the efforts made by every country,' Greek Finance Minister George Papaconstantinou said.

He said Greece will have no difficulty borrowing money on financial markets in the upcoming months, but wants to do so at lower borrowing costs.

The crisis over Greece's debt, expected to hit 120 per cent of national output this year, and its budget deficit, which reached 12.9 per cent of GDP last year, has shaken confidence in the euro.

Many analysts insist that failure to help Greece could have a domino effect on neighbouring Central and Eastern European countries.

'It is hard to predict what impact a bankrupt Greece would have on the rest of Europe and it would be considerable for those countries which are very heavily invested,' an economist, who asked to remain anonymous, from the National Bank of Greece told the German Press Agency dpa.

Another rising concern for many Greeks is what would happen if Germany's other key demand - that any rescue plan would be accompanied by new, strict rules to punish and potentially expel eurozone members which flout the single currency's rules - would be accepted.

One thing is clear, whatever the outcome of Thursday's EU summit, Greece is in for several years of social strife as its population comes to turns with lower incomes and higher taxes.

'I do not mind paying higher taxes for things like alcohol and taxes, but how will we make ends meet with lower incomes and pensions?' asked 65-year-old Dimitris Varnaridis.

Shopkeepers across the city are already feeling the fallout from the cuts in bonuses and pay.

'People are scared of spending their money on clothes, furniture and electronic equipment and are only purchasing food,' said Fotini Sotiropoulou, who owns a shop along Athens' busy Patission Avenue.

Aside from income cuts, the government also announced plans to target people who report middle-class incomes while living upper- class lifestyles by imposing minimum upkeep taxes on such luxury items as vacation homes, boats and high-end cars.

According to Transparency International, Greece is one of the most corrupt countries in the European Union, apart from Romania and Bulgaria.

Not only do professionals such as doctors and lawyers avoid giving receipts, but taking bribes for better or faster service is also common with tax officials and town planners.

'Our economic problems and corruption go hand in hand,' said Aris Syngros, manager of the Greek branch of Transparency International.

He said that, in the case of Greece, corruption and widespread tax evasion have been crucial in dragging the country into the present situation.