The balancing act of keeping debt-stricken Greece on track resumes in earnest this week as creditors return to Athens amid fears that fiscal progress is being derailed by a series of controversial court decisions.
Mission chiefs representing the EU, European Central Bank and International Monetary Fund fly into a capital that is again seething with rage after striking employees at the Public Power Corporation vowed to keep up industrial action despite being forcibly returned to work by the government on Saturday.
The 19,000 workers now face the threat of arrest if they continue their programme of rolling 48-hour strikes.
The ruling coalition took the draconian step after the strike against internationally mandated plans to privatise the company caused intermittent blackouts.
“Just as it was announced on the first day of this strike, the government has decided to protect the public interest,” said the government spokeswoman, Sofia Voultepsi. “In a democracy, the laws and court decisions must have the respect of all as the public interest comes first.”
But the turbulence could soon be overshadowed as a promise by the prime minister, Antonis Samaras, to compensate for wage cuts demanded by lenders as the price of aid has renewed concerns of hard-won budget targets being overturned. Officials at the “troika” of international lenders fear any reversals will exacerbate a funding gap already put at €12bn (£9.5bn).
The setback comes as Greece is poised to be given the green light for its next €1bn aid instalment on Monday and follows a series of court rulings declaring the wage cuts initiated at the start of the debt crisis to be unconstitutional.
Last year, the judiciary appealed to the country’s highest court to annul legislation implementing cuts. In what was seen as a major blow to Greece’s fiscal adjustment programme, the tribunal upheld the request.
In January, a similar ruling issued by Greece’s highest administrative court ordered that 10% wage cuts imposed on employees in the armed forces and emergency services also be revoked. Government economists estimate that the cost of restoring wages in all three sectors would cost as much as €650m.
Under pressure from anti-bailout populists on the left and right, – and amid mounting speculation of early elections being sparked by the need to replace President Karolos Papoulias at the end of his tenure next March – Samaras has signalled that he will do what it takes to fulfil the judgments. Public-sector workers have seen salaries slashed by an average of 40% since 2010 – triggering widespread despondency among an electorate that gave the leader’s own conservative New Democracy party a drubbing in May’s European elections.
The finance ministry now faces the herculean task of convincing highly sceptical creditors that it can plug the gap. Plans will be put to mission chiefs this week, officials said. “We’ve done our sums, we think we can do it,” said one insider, reiterating Athens’ contention that next year’s looming funding gap was not as large as lenders believed. “It won’t be anywhere near €12bn.”
But the furore has also sparked fears of reform fatigue, fuelled in part by a government reshuffle that saw anti-bailout populists installed in key posts last month.
“It is crazy that courts are giving orders to the government,” Anna Diamantopoulou, a prominent reformer and former EU commissioner, said in an interview. “We have a million people without basic social security because we don’t have the money to fund it and now they are demanding wage increases. It is absolutely unbelievable.”
Analysts fear that rolling back public sector wage cuts will not only dent the deficit – reduced from 15 to 4 percent in the last five years – but set in motion a cavalcade of similar demands.
“Greece has built up some creditability on the reform front and this is not the time to put that in question,” said professor Kevin Featherstone who heads the Hellenic Observatory at the London School of Economics. “The government needs to sustain reforms so it can secure a better deal later this year on the issue of the country’s debt which is the real game changer,” he told the Guardian.
At close to 175% of GDP, Greece’s debt is by far the highest in the European Union.