Greek Leader Returns to Strike-Paralyzed Country

ATHENS, Greece (March 11) -- Greece's embattled Prime Minister George Papandreou returned from a weeklong tour of Western capitals to swelling social discontent over a fresh batch of brutal austerity measures.

Papandreou drew strong political support from U.S. President Barack Obama, German Chancellor Angela Merkel and French President Nicolas Sarkozy in his plea for a clampdown on pesky speculators betting billions of dollars on Greece's chances of going bust.

But back home, communist-led action groups have taken center stage in Greece's near-daily show of wildcat strikes and demonstrations. The country's two biggest labour unions, GSEE and ADEDY, called on Greece's 4.5 million labor force to walk off work today to protest the measures.

At issue are severe budget cuts unveiled last week in the government's last-ditch attempt to get Greece's financial house in order before calling in the International Monetary Fund or asking for a European bailout. Two previous austerity packages have already failed to convince Greece's European partners -- and fidgety financial investors -- that they would have a sufficient impact on the country's massive budget deficit.

Rail and public transport remained idle across the country, and commercial aircraft were grounded at Athens' airport, keeping Greece isolated from the rest of the world.

Striking seamen kept ships tied up at ports, while the 24-hour strike shut down schools, hospitals, banks and popular tourist sites like the Acropolis.

Wielding red flags and banners reading "Let the oligarchy pay for the crisis," public and private sector employees took to the streets throughout the country. Violence marred a massive protest march by more than 30,000 workers in central Athens.

The scuffles erupted when riot police scrambled to shield a state finance bureau from a force of 200 black-clad anarchists hurling rocks and petrol bombs at the building. Militant youths ransacked scores of surrounding buildings as panic-stricken passers-by fled the commercial center of Athens.

A flurry of weekend opinion polls showed Greeks divided over the government's latest $6.5 billion deficit-busting plan, which increases the sales tax, freezes pensions and slashes civil servants' Christmas, Easter and summer bonuses by 30 percent.

While one survey said 46.6 percent supported the measures, another indicated that 80 percent of Greeks considered them socially unfair.

Rolling strikes and work stoppages pose a test of strength for Papandreou's newly elected government and its ability to enforce belt-tightening reforms in hopes of clawing the country out of its worst postwar financial crisis.

"This is a socialist administration with a labor-friendly tradition," says George Kirtsos, a publisher and political analyst based in Athens. "Social discontent can be managed. The real threat, though, is whether Papandreou can pull through and effectively manage the reforms he has announced."

Since Greece shocked the European Union by unveiling a deficit of 12.7 percent of gross domestic product -- more than four times greater than EU limits -- global investors have grown a little less skittish. Greece managed to sell $6.8 billion in state bonds soon after passing its third batch of budget cuts.

But Papandreou -- a sociologist by profession, and the sober-sided antithesis of his father, Andreas Papandreou, who founded and ruled Greece's PASOK socialist party with an iron fist -- faces growing discontent within his party over his draconian cost cuts.

Greece represents a meager 2.7 percent of the euro zone's $13 trillion economy, but its financial crisis has walloped the euro and called into question the very livelihood of the currency used by the zone's 16 nation members.

Analysts warn that should Papandreou fail to make gains with his $6.5 billion austerity package, Greece will sink into a deeper recession, testing the pain threshold of the euro.

Already this week, Greece warned of a worsening financial outlook, telling the EU that its gross domestic output would "most likely" shrink more than the forecast 0.3 percent.

Economists and credit ratings have repeatedly warned that a sharp slowdown in the Greek economy could spoil the country's chances of slashing its deficit to 2.8 percent by 2012.

"It's a huge gambit," says Gikas Hardouvelis, a professor of economics at Piraeus University. "Papandreou can't afford to let up. This is Greece's last chance."