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.
New austerity measures have already been adopted by the Greek cabinet in order to secure a crucial €130 billion bailout from the EU and the IMF. 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,” he warned.
Six ministers have quit the cabinet disagreeing with the harsh austerity measures.
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.