Greece crisis: will there be a Europe bailout?
Updated on 10 February 2010
As workers in Greece strike for 24 hours in protest at harsh economic measures to control debt, Faisal Islam believes Germany and France are "cooking up" a bailout.
Public sector workers in Greece are beginning industrial action in the first major test of the government's commitment to push through tough measures to tackle a major debt crisis.
Business reporter John Sparks, who is in Athens, writes: "The strikes began early this morning. Flights were halted just after midnight, state schools and tax offices have been shut and state-run hospitals are now running on emergency staff.
"Unions ended weeks of caution after Greece's new socialist government introduced vicious cuts — like cutting public sector pay, slashing early retirement rights, and even tapping the country's powerful orthodox church for more taxes.
"The stoppage has been organised by Aday, an umbrella union representing civil servants.
"The largest private sector labour organisation in Greece, the GSEE union, is planning another strike on 24 February.
"But it remains unclear whether the protests will represent the start of a serious labour backlash against the new measures or a demonstration of union dissatisfaction in a country where strikes are common."
Unions oppose plans to freeze public wages, slash the salary supplements many Greeks get on top of their base pay, and replace only one in five people leaving the civil service.
They say tax reforms, which are also part of the EU-backed plan to shore up Greece's finances, hurt the poor.
Police are on standby for violent street demonstrations. There are reports of planned protests close to the Parthenon in Athens.
EU leaders will discuss Greece at a special economy summit in Brussels tomorrow (Thursday).
Investors, rating agencies and EU policymakers will monitor the strike and the government's response. They have said Greece will not get support for free.
Nobel Prize winner for economics, Joseph Stiglitz, told Channel 4 News: "The reality is that there is no real issue here of the ability [of Greece] to pay debts.
"But the financial market is making a bet, you might say speculating, on there being a problem.
"The fact that this is imposing huge costs is a second order consideration."
On the issue of European economies, like Germany, helping Greece ride out the storm, he said: "What is needed is a show of solidarity with the other countries of Europe.
"You may have to provide a little liquidity temporarily, but there is essentially no risk of Europe having to give up German taxpayers' money to help those in other parts of Europe."
Economics correspondent Faisal Islam writes -
My sense is that Germany and France are cooking up some sort of bailout for Greece behind closed doors ahead of Thursday's European leaders' summit in Brussels.
The official position of, for example, Christine Lagarde, the French finance minister is that ‘we trust the Greek authorities to take all the necessary measures to tackle their deficits’.
You can be sure, though, that something is being concocted, they may be going all out to avoid it being termed a bailout.
So this longstanding Mexican standoff between the holders of the purse strings in the eurozone, and the club med overindebted countries, looks to be coming to a head, probably in time for Thursday's EU Leaders' summit in Brussels.
The end result may be some sort of rescheduling of Greece’s debt repayments, through a bilateral guarantee of portions of Greek debt.
