ATHENS, Greece (AP) — Greek shares plunged Monday on the eve of a new inspection of Greece's troubled austerity program as investors feared the barely solvent country could be forced to leave Europe's single currency.
Roughly more than €1.5 billion ($1.8 billion) was wiped off the value of listed companies. The main exchange in Athens was down 7.1 percent shortly before closing.
After years of profligate government overspending, Greece is being kept afloat by emergency loans from its European partners and the International Monetary Fund.
But the two bailout packages worth some €240 billion ($290 billion) came with many strings attached, not least a big cut in government spending. The country also has to sell off large chunks of the state, including property, reform the civil service and inefficient tax collection system, and open protected professions to competition. If not, the loans will stop.
Finance Minister Yannis Stournaras will meet inspectors from the EU, the IMF and the European Central Bank on Thursday, and the so-called troika is expected to issue its report on the course of reforms in several weeks' time.
Even though wages and pensions have been cut and taxes raised, the program is flagging. A political crisis that was only solved after two inconclusive elections in May and June wasted three months, and the privatization drive is expected to net only a tenth of its targets this year.
The new three-party coalition government is scrambling to identify €11.5 billion ($14 billion) in required new spending cuts for 2013-14, combined with a €3 billion revenue boost.
If the loans were stopped, the conservative-led coalition would be unable to pay for police, hospitals, schools and other vital services, or to keep up interest payments to creditors.
The head of the anti-austerity radical left Syriza party, which came a surprise second in both elections but refused to participate in government, said Monday that Greece shouldn't implement more austerity.
Alexis Tsipras told party lawmakers that to impose more austerity in a country that's been destroyed by recession would be "pure madness" and "lead with mathematical certainty to bankruptcy."
Tsipras said he would not meet with the inspectors, and urged other party leaders to follow suit.
"The troika is coming to our country for yet another time, tomorrow, to interrogate the government, and impose its catastrophic recipe that led us to the edge of the cliff," Tsipras said. "The government must, at last, understand that it has no business talking with three employees dispatched to enforce a failed program."
Last week, both junior coalition partners promised there would be no more austerity measures this year, although finance minister Stournaras appeared less certain.
On Sunday, German Vice Chancellor Philipp Roesler questioned whether Greece can fulfill the conditions for receiving further international aid and said the idea of the country leaving the euro had "lost its horror."
Asked about the consequences of Greece losing its cash lifeline, Roesler told ARD TV it would first of all mean the country becoming insolvent — "but then perhaps the discussion will start in Greece itself and the Greeks will themselves come to the conclusion that it is perhaps smarter to leave the eurozone."
The two main coalition partners were elected on pledges to tweak the bailout commitments and secure more time in which to implement them due to the worse-than-expected recession.
At the end of this year, the cumulative five-year fall in output is expected to reach 20 percent, which caused Prime Minister Antonis Samaras to draw a parallel with the Great Depression in the U.S.
Unemployment is around 23 percent, with more than 50 percent under-25s out of work. Tens of thousands of companies have closed, while Greece's biggest trade federation said Monday it expects its members' turnover to drop 54 percent this year compared to 2011.
Meanwhile, union opposition to cutbacks — which prompted a string of general strikes and demonstrations that often turned violent — is increasing. On Tuesday, when the troika inspectors arrive, the ADEDY civil servants union will hold a work stoppage in Athens and a demonstration against planned cuts in lump sums paid to its members upon retirement.