Greece has finally passed the radical budget cuts needed to secure fresh aid but it is the best of a bad job and much depends on how the measures are implemented, financial analysts said yesterday.
Violent protests rocked Athens as Parliament adopted fresh austerity measures in the hope that the EU and International Monetary Fund would now stump up with a €130 billion bailout.
The trouble is, analysts said, much still needs to be settled while the prospect of widespread popular unrest as the economy slows under the weight of more austerity could complicate matters even more.
GFT analyst David Morrison in London said the immediate market reaction was one of relief, with the euro and stocks rising on hopes the worst is over.
The accord, however, also paves “the way to further civil unrest and further strike action, and the Greek government now has to follow through with its promises,” Mr Morrision said in a note.
“This is going to be problematic and it is ‘odds on’ that we’ll be hearing that yet more (fiscal) targets have been missed in months to come.”
Greek Prime Minister Lucas Papademos said before the tense vote on Sunday, with thousands of police on guard outside Parliament, that “if we collapse, we won’t be able to fix anything anymore. The package is the country’s only hope”.
Athens woke yesterday to scenes of devastation after the protests left 45 buildings burnt out or badly damaged in central Athens.
The protesters denounced what they described as blackmail by the “troika” of the EU, the IMF and the European Central Bank.
“It’s not easy to live in these conditions,” said 49-year-old engineer Andreas Maragoudakis. “By 2020 we will be the Germans’ slaves.”
Civil engineer Anastasia Papadaki, 27, said “the measures are not the solutions to the problem as they will not bring growth. It’s just the international community blackmailing us”.
Commerzbank analysts said the Greek vote was just one step, noting that EU finance ministers still have to discuss the issue tomorrow in Brussels where impatience with Athens has grown steadily at the constant delays.
More important still, elections in April could easily bring opponents of the accord to power, putting the whole Greek debt rescue in jeopardy once again. “There is no cause for major relief,” Commerzbank said in a note.
“It is obvious that the Greek government will look completely different following the elections in April,” with the main socialist party which got 44 per cent of the votes last time now at eight per cent in recent polls, it said.
“So if European politicians welcome the Greek decision today, the question of how long this decision is actually valid for will simmer in the background.
“Considering the explosive situation in Greece it would hardly come as a surprise if those opposing the reforms were to take control of the country in April. In that case everything would start all over again.”