Greece suffered a new setback on Wednesday when its borrowing rate shot up again to above 7.0 percent, just as taxi drivers and lawyers began a new series of strikes against huge budget cuts. The Socialist government of Prime Minister George Papandreou faces renewed doubts on international markets about its ability to borrow, and opposition at home to how draconian economic reforms will affect specific sectors.
About 15,000 taxi drivers were set to demonstrate in the centre of Athens in the afternoon. Greece has to borrow heavily to avoid default and pay current bills including some pension entitlements, and the interest rate or yield it has to offer has become critical to the nation's future. On Wednesday, the rate demanded on the market to buy 10-year government debt rose to 7.019 percent despite a eurozone agreement on Sunday on a stand-by rescue.
The yield, which had fallen sharply in initial reaction to the agreement, was 6.815 percent on Tuesday, having hit a record of slightly more than 7.5 percent last Thursday. Greece has said that such a high cost of borrowing is unbearable, as it negates much of the saving expected from drastic economic reforms imposed by the European Union. On Tuesday, in a first test of this credibility prop, Greece successfully issued short-term debt with a life of six and 12 months to raise 1.56 billion euros (2.12 billion dollars). The issue was well oversubscribed, but the rates offered were high at 4.55 and 4.85 percent from 1.38 and 2.20 percent in January.
At French bank BNP Paribas, analysts noted that Greece needed to borrow about 6.5 billion euros by the end of May. They commented that the good news was that Greece "is further ahead with its financing programme" but the bad news was that "its ability to raise medium and long-term funds is still questioned." The government's programme to reduce the public deficit from about 12.9 percent of output last year by four percentage points this year includes cuts in the pay of public workers and an attack on tax fraud.
On the home front, the taxi drivers and lawyers were protesting against a tax reform approved in parliament on Wednesday. The federation of taxi and car rental companies POE.IATA which has 30,000 members and which has already staged two similar strikes, said: "Our demand is the same: the non-inclusion of our sector in the logic of the tax project."
Lawyers have called for a three-day strike, the second in a month, against the bill which reforms taxation of self-employed professionals. Storeholders on public markets were also on strike for 24 hours against being forced to use regulatory cash registers, and about 200 of them demonstrated outside the economy ministry in the city centre. Municipal workers stopped work for four hours to protest about the way their social security arrangements are managed and were to demonstrate outside the health ministry.
On Thursday, public transport workers in Athens, excluding workers on the underground rail system, are to stop work for six hours and secondary school teachers for three hours. The federation of public sector workers ADEDY which has 300,000 members has announced a strike across the public sector for April 22, the fourth this year against the cutbacks and reforms.