Greeks set new strikes, economy firmly in recession

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Greek unions announced on Wednesday that they would stage a 24-hour nationwide strike on May 20, the second major protest against tough austerity measures pledged in exchange for billions of euros in aid.

The main public and private sector led a 50,000-strong march a week ago in which hundreds of angry Greeks fought pitched battles with police in the streets of central Athens and three people were killed in a petrol bomb attack on a local bank.

They are due to march in the capital on Wednesday from 6 p.m. (1500 GMT), in a rally which will give indications about the public mood before the big walkout next week.

Investors are closely watching public reaction to government wage and pension cuts amid concerns broader unrest could hit Prime Minister George Papandreou's resolve in pushing them through.

New figures published on Wednesday showed Greece's economy contracted 0.8 percent in the first quarter compared to the last three months of 2009.

The austerity measures, pledged in return for 110 billion euros ($139.7 billion) in emergency aid from the European Union and International Monetary Fund, are expected to keep the economy in recession through 2011.

"The IMF will not stop thirsting for workers' blood," said Yannis Panagopoulos, chairman of Greece's main private sector labour union GSEE. "Its recipes are a disaster and the government must turn them down."

The country's socialist government on Monday unveiled a draft law to raise the average retirement age and cuts benefits, which further angered unions already opposed to previous steps including public wage cuts and tax hikes.

RECESSION

The first quarter contraction was not as bad as economists expected, but the austerity steps are expected to sharply curtail domestic consumption, a key driver of Greece's 240 billion euro economy.

Data showed the economy shrank by 2.3 percent year-on-year in the first three months of the year. The government sees the economy shrinking by 4 percent over the full year.

Nikos Magginas, an economist at National Bank of Greece, said he expected the pace of contraction to accelerate in the next two quarters as wage cuts hit disposable incomes and uncertainty about economic prospects increased.

Opinion polls show that a strong majority of Greeks believe the measures are unfair and that most favour continued strikes and protests. Many Greeks are demanding that Papandreou take concrete steps to punish corrupt officials they believe are responsible for leading the country down an economic dead-end.

The protest last week unleashed the worst violence the country has seen since riots in 2008 and Wednesday's rally will show whether the unions can maintain their momentum.

The May 20 walkout will take place a day after a 8.5 billion euro 10-year Greek bond matures, an event which pushed Greece to seek aid.

The country expects to get a first instalment of 20 billion euros in aid from the EU and IMF to help it refinance the debt.

Global policymakers agreed last week an emergency rescue package worth about $1 trillion to stabilise world financial markets and prevent the Greek debt crisis from spreading and destroying the euro currency.