Greece’s austerity programme will only be successful if it is combined with investment and economic growth,” Prime Minister George Papandreou said on Monday.
Greece has been battling to avoid default for months while caught in the midst of a recession and is trying to rein in debt totalling more than 300 billion euros.
“The austerity programme was the only way to avert the threat of bankruptcy,” Papandreou told Germany’s Handelsblatt newspaper. “The programme can be sustainable only if we stimulate investment and growth.” The government sees the economy shrinking by 4 per cent over the year and by 2.6 per cent in 2011, declines that are set against plans to cut the deficit from 13.6 per cent of GDP to 3 per cent by 2013.
Debt-ridden Greece is to receive a 14.5 billion euro loan instalment from the European Union early this week. The money, part of a larger 110 billion euro (140 billion dollar) package from the EU and IMF, will arrive just in time to cover a 9 billion euro Greek debt payment due on May 19.
Athens drew the first package funds from the IMF, totalling 5.5 billion euros, last Wednesday and the next tranche of funds from the IMF and the EU will arrive in August.
Economists have expressed concern that the Greek economy may plunge even deeper in recession with drastic belt-tightening measures.
“I believe that we can implement out programme but we must make sure that the weakest in our society do not fall into the abyss,” said Papandreou, adding, “We cannot push people below the poverty line.” The debt crisis and subsequent public spending cuts and tax hikes have sparked protests and riots in Greece, leaving three people dead when a bank was firebombed last week.
European Union policymakers and investors are closely monitoring public reaction amid concerns that large scale social unrest could prevent the government from pushing through salary rollbacks, pension cuts and consumer tax hikes - or spread to other countries facing public cutbacks.
The austerity programme has put the government up against the country’s largest unions, who have so far staged three strikes in protest and are holding a fourth on May 20.
The latest walkout is expected to disrupt sea and rail travel, and shut down ministries across the country.
A poll published on Sunday in the Ethnocs newspaper found that most Greeks, 58.8 per cent believe their country will be able to avoid going bankrupt, while 36.6 per cent considered default inevitable.
Of the 1,028 people polled, 56.2 per cent considered the austerity measures to be necessary and 87.8 per cent judged them to be unfair.
