Greece's Surging Unemployment May Become ‘Bomb’ to Society, Minister Says

By Marcus Bensasson - Mar 28, 2011 3:03 AM PT


Greece’s increasing jobless rate may become a “bomb in the foundations of society” as the government struggles to lower the country’s budget gap, Economy and Competitiveness Minister Michalis Chrisochoides said.

“The economic problem will at some point be solved but the social problems are getting continually more toxic,” Chrisochoides said in an interview on March 22 in Athens. “At the moment we have a society that is patient and dealing with the problem, but we have to show people that what we are doing is working.”

Greece’s unemployment rate surged to a record 14.8 percent in December, making it the second highest after Spain in the 17- member euro region. The government has been forced to toughen spending cuts and raise taxes in exchange for last year’s 110 billion-euro ($115 billion bailout from the European Union and the International Monetary Fund as the nation grapples with its third year of recession.

A possible doubling of investment under the country’s National Strategic Reference Framework may help shift the growth drivers from consumer spending to exports and output, Chrisochoides said. The funds are unaffected by government efforts to implement deficit-cutting measures equivalent to 0.75 percent of gross domestic product this year, he said.

“We are trying to create a Greece that is friendly to investment,” Chrisochoides said. “Many businesses that didn’t have a healthy foundation will close during this crisis. The issue is to avoid strong ones closing because of a lack of available bank finance.”

Among those at risk is Elefsina Shipyards, which filed for creditor protection on March 10. The shipyard, which builds commercial and military ships, is in talks with the government and its lenders, Alpha Bank SA and Emporiki Bank SA (TEMP) about a restructuring.

Elefsina closing “would be a defeat because it is a very strong operation that employs 700 people and gives work to small businesses,” Chrisochoides said.