EU And IMF Need Assurances From Greek Unions

Germany in particular believes that Greece may not be able to meet its financial obligations. And, the rescheduling of the southern European country’s sovereign debt may also need private bondholders to bear some of the financial burden. Obtaining that support will not be simple

The bailouts of Greece, Portugal, and Ireland  have all lacked support from public unions. Large unions and other worker groups have effectively shut the public transportation system in Greece more than once. These actions are a sort of financial suicide. Greece cannot make its debt obligations if the central government’s revenue falls sharply. Greece relies on tourism for much of its GDP. Travelers are understandably reluctant to visit countries where their ability to travel is made nearly impossible.

The bailout terms for troubled European countries are based on legislation passed by the parliaments of the nations which upport of the contracts made with the IMF and EU. The governments that negotiate these terms, or resist them, are sometimes voted out of office. Portugal and Ireland are evidence of this.

The street protests and strikes caused by troubled governments that have agreed to cut salaries, benefits, and social services to help balance budgets will grow. It is the only leverage the voters have beyond the ballot box. Aggressive protests are a more immediate and violent ways to make the case that bailout decisions do not have popular support

The EU and IMF have negotiated with only a part of the entities needed to ratify bailouts–the central governments of troubled nations. That leaves the strong possibility that public unions will undermine the ability of the governments to satisfy their future obligations. Organized labor in these countries has already caused concerns about whether bailouts are no more than good money thrown after bad. Unions have a stake in the outcomes of the agreements. Their positions might as well be known at the start so that the decisions to help nations like Greece are made with all the facts in hand. Unions need to sign of any agreements with the US and IMF.

Douglas A. McIntyre