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Greeks walk out over cuts

Gavin Hewitt | 10:48 UK time, Wednesday, 24 February 2010

Protest march by striking workers in Athens, 24 Feb 10Ships, planes and trains won't be running in Greece today. Schools will be shut down. Government offices and court rooms will fall silent. Hospitals won't be able to offer their normal services. This is the first major strike since the Papandreou government took over at the end of last year. The big unions are backing it.

Polls suggest that a majority of Greeks understand that the deficit has to be cut and most seem to support the government's austerity plan.

So attention will fall on the degree of support for today's strike. The union leaders understand they cannot completely ignore the reality of Greece's finances. "The Greek people are well aware that the fiscal situation of the country is in terrible shape," said Yiannis Panagopoulos. His argument is for fairness. "We demand a fair distribution of the burden, so that wage-earners and pensioners do not pay the price for a crisis they did not create."

The Greek government is trying to be even-handed. Some taxes on upper earners are set to rise and they are targeting tax evaders. But reducing the deficit by 4% this year will require some sacrifices by ordinary Greeks. That point is not accepted by many of those who take to the streets. They want their old world to continue. And it can't.

It is widely believed in Greece that international bankers caused the recession. There is enough truth in it to make the charge stick. Financial products were chopped and sliced and repackaged and resold based on selling mortgages to those who could not repay them. But it was an era of easy money that most Western governments and consumers gorged themselves on. It is a difficult political message, but bankers alone did not cause the current crisis. So far the Papandreou government has not confronted this and accepted that it is not the bankers alone who are responsible. Indeed, they have preferred to blame speculators.

Others too are being accused. The Greek government spokesman has pointed his finger at Brussels. If there had been better surveillance from Brussels the "warning signals" might have been spotted far sooner, he said. Regardless of the truth of this it again shifts responsibility away from Greece. Brussels immediately rejected the blame being placed on its shoulders.

The EU is increasingly unpopular in Greece. It partly reflects the need to point to blame outsiders. It also reflects the dangers for the EU in putting pressure on Athens to reduce its deficit further. The people do not like the interference. "We have lost part of our sovereignty," said the Prime Minister, George Papandreou. It may be why eventually an IMF bail-out is preferred. The EU as enforcer carries risk for those who run the union.

The difficulty the Greek government finds in making the case to the unions is reflected elsewhere in Europe. There are strikes in Spain and walk-outs are planned in Portugal. Sooner or later the high-spending public sectors will have to be pruned. It will mark a paradigm shift. No senior politician is yet fessing up to what lies ahead. They hope that a return to growth will mask the challenge to government spending that the recession has laid down.

Even as the strikers march in Athens, representatives of the European Commission, the European Central Bank and the IMF are in town analysing the austerity programme and whether it carries conviction. The EU has set a deadline of 16 March for the first assessment to be made. The crisis, however, does not wait for officials. Yesterday the credit ratings of Greece's four largest banks were downgraded. Their status is only a couple of levels above "junk". So the cost of borrowing drifts higher.

In Germany the economic confidence index edges downwards. Apparently the budget crisis in the eurozone is "unsettling consumers as they fear negative effects on Germany's economic development".

The strikers are marching for fairness, to protect their standards of living, but this is a crisis with much deeper roots and the politicians shy away from confronting it.

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