By Ambrose Evans-Pritchard 13 Dec 2009
While premier George Papandreou offered pro forma assurances at Friday's EU summit that Greece would not default on its €298bn (£268bn) debt, his words to reporters afterwards had a different flavour.
"Salaried workers will not pay for this situation: we will not proceed with wage freezes or cuts. We did not come to power to tear down the social state," he said.
Were we to believe that a country in the grip anarchist riots and prey to hard-Left unions would risk its democracy to please Brussels?
Mr Papandreou has good reason to throw the gauntlet at Europe's feet. Greece is being told to adopt an IMF-style austerity package, without the devaluation so central to IMF plans. The prescription is ruinous and patently self-defeating. Public debt is already 113pc of GDP. The Commission says it will reach 125pc by late 2010. It may top 140pc by 2012.
If Greece were to impose the draconian pay cuts under way in Ireland (5pc for lower state workers, rising to 20pc for bosses), it would deepen depression and cause tax revenues to collapse further. It is already too late for such crude policies. Greece is past the tipping point of a compound debt spiral.
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