The newly elected centre-left Pan-Hellenic Socialist Movement (PASOK) government, led by George Papandreou, faces mounting challenges arising from the adverse socio-political and economic environment. Domestic terrorist groups planted incendiary devices outside a foreign-owned business, as well as the offices and private houses of ministers and deputies of the ruling and leading opposition parties, and opened fire against a police station (injuring six officers and a citizen). In addition, the government is confronted by further industrial action by dockworkers at the country’s main port of Piraeus; the dockworkers are demanding the annulment of the concession deal made with the Chinese shipping company Cosco to expand and manage the port’s Pier II and construct a new Pier III. They argue that the deal weakens employment rights and may cause job cuts, while it includes tax breaks considered harmful to the national economy and the sustainability of the Piraeus Port Authority. The two-and-a-half-week strike (which has been suspended temporarily after the government’s promise to renegotiate the deal with Cosco) seriously disrupted operations at the port and is believed to have cost Greek businesses some EUR30m and the state an estimated EUR3m per day in revenues; export firms have also been hit hard. 

Meanwhile, according to Eurostat, Greece’s budget deficit in 2008 stood at 7.7% of GDP, but the figures could worsen as the data are still being reviewed by officials in Brussels. The country’s budget data credibility was brought into further disrepute in late October after the recently appointed finance minister more than doubled the expected budget deficit for 2009 to 12.5% of GDP. As a result of the considerable deterioration of the government’s fiscal figures, ratings agency Fitch downgraded its credit rating on Greece to A- from A, while Moody’s placed the country under close supervision, adversely affecting the Greek bonds market and the Athens stock exchange.  

The government has pledged to improve the quality of statistical reporting, by boosting the national statistics office’s independence and reducing the influence of policy-makers on it, and to create a new committee to assess the real state of the domestic economy. More importantly, the government is compiling an ambitious plan worth EUR10.0bn (or 4.0% of GDP) to support the public coffers, aimed at lowering the deficit to below 10.0% of GDP in 2010 and (at the same time) providing a EUR2.5bn support package in a bid to boost economic growth. To this end and in order to bolster revenues, a new bill will be submitted to parliament that will include a rise in the special consumption tax on fuel, alcohol and tobacco, as well as the imposition of an extraordinary levy on major profitable enterprises.