Europe’s two richest countries, France and Germany, have cast their weight behind their poorest peer, Greece, saying they do not intend to push the near-bankrupt nation out of the euro fold. Neither, they say, do they have a new proposal or plan to keep Greece’s running debt crisis from spiral out of control.
But on Wednesday French President Nikolas Sarkozy and German Chancellor Angela Merkel took a huge leap of faith by telling their embattled Greek counterpart George Papandreou that they expect him deliver on pledges to reboot the Greek economy.
It’s not the first reprimand Mr. Papandreou has faced in recent months, but it will probably be the last.
The threat, including an imminent cut-off of multi-billion loan funds from international lenders, has set fire to dragging Greek feet. Finance ministry officials are now scrambling to push through delayed reforms and make up for more than €2-billion in shortfalls recorded in the 2011 budget alone. “We have to rally together once more in a national effort,” Finance Minister Evangelos Venizelos said earlier this week.
That may prove tricky.
With recession biting deeper into the Greek economy and unemployment soaring -- it’s expected to climb to 20 per cent by 2012 -- austerity-hit Greeks are balking at added belt-tightening measures like never before.
On Friday, civil groups said they were mounting class-action suits to block a new property tax announced by the government this week in a desperate bid to close the €2-billion budget shortfall. A string of social networking sites and blogs have sprung up in recent days, rallying Greeks not to pay the new tax.
Seven in 10 Greeks already face difficulty paying a rash of tax hikes imposed by the socialist government in the last two years, according to opinion polls published earlier this month.
The new tariff aims to target high-earners. Still, it exempts monasteries, places of worship and charity funds run by the wealthy Greek Church while leaving none of the country’s five million homeowners untouched -- not even the handicapped and unemployed, who are traditionally shielded by the state with special exceptions.
Enraging Greeks further are government threats to plunge homeowners into darkness if they fail to pay the tax, which will be charged through landlords’ electricity bills.
“It’s blackmail,” huffed Nikos Fotopoulos, the leader of the country’s most powerful union. “We will not allow the public power corporation to become a means of tax collection for any government.”
The measure signals what analysts are calling a complete collapse and humiliating failure of the country’s ailing tax collection system. It also mirrors the government’s repeated refusal to pursue radical spending cuts in the bloated public sector, a move that would upend decades of cozy ties between the ruling party and its core constituency.
“They are killing the private sector,” says former finance minister Stefanos Manos, who now leads a political action group. “The government should quit and Greece’s international lenders should spurn such disgraceful moves [ the tax levy]”
Perhaps. But until then, Mr. Papandreou -- and Greeks altogether -- have been given one last chance to stay in the euro.
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