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"Why should I as someone in Northern Europe pay for the errors in Greece's policies"

o Is Greece’s Debt Trashing the Euro? (NYT)

DIMITRIS DAMIANIDIS is a high school teacher and a strong supporter of Greece’s socialist government. But that won’t deter him from going on strike with hundreds of thousands of other public sector workers next week to fight for the 28,000-euro pension that he expects to receive annually after he turns 60 next year.

“Why should I as a worker pay for the errors in policies?” he asked, in response to reports that the embattled Greek state will cut his pay and, by extension, retirement benefits. “The worker can’t be the scapegoat. So we have to defend ourselves.”

As Mr. Damianidis and others on the state payroll prepare to stop work on Wednesday, fear is building that the country’s new government may lack the nerve to cut public wages and pension payments, which make up 51 percent of its budget.

“The risk of contagion is a real one,” said Scott Thiel, the head of European fixed income at the asset management firm BlackRock in London. “Investor sentiment is now focused on countries like Spain and Portugal, where fundamentals are weakest.” He said that for now, he saw little risk for Italy, given the relative stability of its economy.

“We have a centralized monetary policy, but we allow budgets and wages to move in different directions,” said Paul De Grauwe, an economist in Brussels who advises the president of the European Commission, José Manuel Barroso. “Without a political union, in the long run the euro zone cannot last.”

Indeed, as core economies like those of France and Germany show signs of economic recovery, Greece, Portugal, Ireland and Spain are just entering savage recessions. Spain, the largest of the peripheral economies, announced last week that the number of its unemployed had reached four million — the highest in its history — and warned that the country’s deficit might be worse than previously thought.