ATHENS — For Greeks who have watched their taxes skyrocket, their wages plunge and their prospects flatline, news of the latest austerity demands from European leaders came like the punch line to a bad joke.
If the Mediterranean country does not receive another bailout, it will default on its debts by mid-March, potentially sending it spinning off the euro currency or even out of the European Union. But before Greece can get more money, Europe is asking it to take steps that threaten to aggravate an already biting recession.
Officials said Wednesday that they were within days of reaching a deal to reduce Greece’s crippling debt and to give it a second, $174 billion bailout.
As Europe starts to acknowledge that its austerity-driven policies elsewhere have not done enough to lift the continent out of its economic troubles, leaders have shown a new willingness to consider economic stimulus policies. But Greece, so far, remains an exception.
If Greece doesn’t lower its minimum wage, cut pensions and further slash spending on public health within days, European leaders have hinted that they are ill-inclined to keep loaning money to help the country pay its debts. They complain that Greece has fallen far short of meeting the financial promises that it has made over the past two years and has nearly run out of time to make up for it.
In Germany, frustration with Greece has grown so deep that leaders there briefly floated the idea last weekend of having a European commissioner take over the country’s budget and spending sovereignty for the duration of the bailout, sparking memories of Germany’s World War II occupation of Greece. They later backed off.
“Greece must live up to its commitments. We can only help when it is not a bottomless pit,” German Finance Minister Wolfgang Schaeuble told Deutschlandfunk radio Wednesday.
Some Greek leaders are incredulous that Europe is demanding cutbacks that could hurt the nation’s poorest first even as it talks about stimulating economic growth elsewhere in the euro zone. “If you cut salaries, incomes, pensions,” said Development Minister Michalis Chrisochoidis, “you cut everything, the demand decreases, and then consumption decreases rapidly. All the policies are part of a vicious circle.”
European leaders say that reducing Greece’s minimum wage would boost the nation’s competitiveness against countries such as Portugal, where labor costs are lower. But Greek officials and economists say that stronger competitiveness is virtually meaningless as long as their future with the euro is in doubt. Only the gutsiest investor, they say, is willing to gamble on the country in the interim, because if Greece goes back to its old currency, the drachma, inflation could wipe out a large portion of those investments.
But many others see the demands as way too burdensome. The cuts “are not necessarily very wisely thought out,” said a Greek official, speaking on the condition of anonymity to talk candidly about Greece’s perception of the demands from the European team of negotiators from the IMF, the European Commission and the European Central Bank. “The troika,” as the team is called, “is becoming harsher,” the official said.
The troika has proposed additional limits on health spending, and many doctors who work in the tan art deco Sismanoglio Hospital, perched atop a hill in a suburb north of Athens, said they’re worried about the future.
Their pay has been slashed, their ranks have thinned by a third, and their workloads have increased as many of their peers go abroad for work or they retire and are not replaced, the doctors said. Foreign suppliers demand upfront payment for bandages and other medical necessities before they send over their goods, fearful that if they extend any credit to Greece they will never be paid back.
Now, the doctors said, the troika is reaching deeper into their professional lives, asking that that they write at least half of their prescriptions for generic drugs, driven in part by suspicion that kickbacks from drug companies are keeping costs artificially high. Doctors acknowledge that corruption is a problem, but they say that the new rules are arbitrary and rigid.
“Regular people pay the ultimate price because they lose access to medical care and prevention,” said Konstantinos Livadas, a urologist.
The younger doctors say they see little prospects for their future.
“How can me and my wife and my little baby, how can we live on 1,500 euros a month?” said Manolis Manousakis, 33, a medical resident whose wife is due to give birth to their first child next week. “There is no other choice than to go abroad. Nine months ago, we didn’t have bandages, we didn’t have stitches.”
But in the eyes of the rest of Europe, Greece has passed up opportunity after opportunity to put itself on a steady path to economic recovery. It has imposed austerity measures — such as raising taxes and cutting pensions — that have caused short-term pain, but it has dithered on other action to help promote growth, such as opening up tightly controlled professions like truck driving and law to more competition.
Many had hoped that the new coalition government that came to power in November would usher through such changes. But the leadership has been riven by political positioning as many in the cabinet prepare for elections in the spring.
And though Greek politicians have acknowledged the need to trim the size of the public sector, economists estimate that public payrolls have shed only a few hundred positions, despite promises to cut 150,000.
“The reform and modernization effort needed for the economy to become competitive and restore growth have lost momentum,” Poul Thomsen, the IMF’s mission chief in Athens, said in an interview published Wednesday in the Kathimerini newspaper.He agreed that the reforms were “painful.”
Patience is waning inside Greece, too. Wage cuts “don’t help demand, they don’t help growth,” said Chrisochoidis, the development minister. “If you want to become Bulgaria, you don’t need the troika. It’s very simple . . . you default and you’re finished.”