Commercial activity came to a virtual standstill here Monday as thousands of workers participated in a 24-hour strike to protest a package of tough austerity measures announced by Greece's Socialist Government on Oct. 11. Tens of thousands of Greeks, waving red flags bearing the hammer-and-sickle emblem of the Communist Party, took to the streets chanting antigovernment slogans.
The new measures include a devaluation of the drachma by 15 percent (the second devaluation in three years), a two-year wage freeze, a tax surcharge on private profits retroactive to 1984, stricter price controls, and restrictions on the importation of luxury goods.
Business and diplomatic sources in Athens had previously expected Greece to seek rescheduling of its large foreign debt next year, but they now say the package of harsh austerity measures should allow Athens to avoid doing so. They stressed that the success of the program will depend on the government's willingness to implement the measures fully.
Success also depends on European Community cooperation. The community will have to approve Greece's import restrictions and agree to postpone implementation of several steps to open up the Greek economy. The Greek government is also expected to request an emergency loan of some $1 billion to $2 billion from the EC. Sources say they expect the EC to agree with Greece's requests.
The move toward a more austere economic policy had long been expected. Greek inflation is running at 20 percent, far higher than its EC partners and the United States. Unemployment is near 10 percent. The Greek trade deficit will total $2.8 billion this year, and the country's foreign debt will exceed $16 billion. The rate of private investment has declined by an average of 10 percent annually since 1980. Thirty-five percent of the government's spending is covered by foreign and domestic borrowing.
Greek Minister of the National Economy Constantine Simitis said the government's immediate goals were to reduce the trade deficit to $1.6 billion next year, diminish the public sector deficit by 4 percent as a percentage of the gross national product, and achieve substantial reduction of inflation by the end of 1986.
Greece's Socialist Prime Minister Andreas Papandreou has been the target of bitter criticism since the measures were announced. The Communist Party called the program a ``heavy blow'' to workers and predicted it would increase inflation and reduce the real wages of Greeks by 10 percent. The party promised to fight the measures.
The leader of the conservative New Democracy party, Constantine Mitsotakis, said the program amounted to an admission that the government's economic policies had been ``a complete failure'' and called on Mr. Papandreou to resign.
Greek and foreign political analysts do not expect the political fallout from the austerity measures to threaten the survival of the government, which has a solid majority in Parliament.
A general consensus exists that tough measures were needed to rescue the faltering economy. But these sources warned that, if the country is beset by a continuous series of strikes, the position could erode seriously and lead to a government crisis next year.