Greek PM Lucas Papademos has warned parliament of “uncontrollable economic chaos” if it fails to approve a new austerity bill that will cut 15,000 public-sector jobs and lower the minimum wage by 20 per cent.
“The Greek parliament is asked to take a historic responsibility, to examine and authorize the new economic program of Greece, the pre-condition for financing the country over the coming years,” Papademos said in a televised address on Saturday.
Meanwhile, the Greek parliament has begun debating the new austerity measures in order to secure a crucial €130 billion bailout from the EU and the IMF. The measures were earlier adopted by the Greek cabinet. Experts say Greece may default as early as March if it does not receive help from international lenders.
The social cost of this program is limited in comparison with the economic and social catastrophe that would follow if we did not adopt it,” the Greek PM warned.
Six ministers have quit the cabinet disagreeing with the harsh austerity measures. Meanwhile, a strike has brought thousands of people onto the streets of Athens. Syntagma Square, where the Greek parliament building is located, was filled with protesters and riot police. Some reports say the protest turned violent, and tear-gas was fired at the crowds. Several people required medical assistance.
Margaret Bogenrief of ACM partners believes the Greek parliament has no choice but to pass these measures. However, she does not think that it will be enough to ensure that Greece will not eventually default.
In an interview with RT, Bogenrief said there is no third option to austerity or default. “I think the markets have been fooling themselves the last six months by thinking that there is a better or third option.”
Should Greece default it would have a devastating impact on the global economy, according to Bogenrief. Much of Eastern Europe will plunge into recession, she says, noting that 22 per cent of Romanian banking is done through Greece.
A Greek default could also hurt Russia, as any shrinking of the European economy would mean lower gas and oil consumption on which the Russian economy heavily relies, Bogenrief believes.
Any European economic troubles caused by a possible Greek default would affect the US economy. “Obviously our import numbers are going to decrease significantly, putting on hold any kind of growth we’ve been kidding ourselves that we have this year.”
And finally, the world’s second-largest economy, China, would also suffer as Europe is its largest trading partner, she concludes.
Her thoughts are echoed by investment analyst Patrick Young, who told RT that “Greece is doomed.”
Young, speaking about the austerity measures that are being debated in parliament, said “there is no way they [the Greeks] are going to be able to implement whatever austerity measures they’re talking about against such a backlash of public opinion.”
And Greece, according to Young, is not the only one that will suffer. The fate of the euro is also in question even if the eurozone drops both Greece and Portugal.
“Does the euro survive? At the moment, I think it can do – but we’re going to see swingeing recession throughout the European Union, and that’s bad for everybody in the world”, Young told RT.