By Dina Kyriakidou
ATHENS (Reuters) - Prime Minister George Papandreou will try to soothe austerity-weary Greeks with a major economic speech Saturday but tight budget constraints allow him little to offer.
Tied by the conditions of a 110 billion euro (91 billion pound) EU/IMF bailout deal aimed at rescuing Greece from bankruptcy, his socialist government has imposed tax rises and draconian salary and pension cuts to fight deficits, prompting strikes and protests.
"Papandreou cannot promise handouts as fiscal conditions do not allow it. He is unlikely to draw an overoptimistic picture, to avoid the risk of relaxation in the effort to repair public finances," said political analyst George Sefertzis.
"I expect him to signal that not only the (fiscal) operation must succeed, but that the patient must also survive it."
All eyes will be on Papandreou to see if he will relax measures to appease a restive public and risk the wrath of international lenders when he speaks at 8 p.m. (6 p.m. British time) at a trade fair in the northern city of Thessaloniki.
Labour unions, which have locked horns with the government repeatedly this year, have planned major rallies which some analysts say may launch a new season of protests as austerity is starting to be felt on the streets.
Police said more than 4,000 police officers would be deployed in Thessaloniki Saturday for fear of possible violence but rain expected at weekend may dampen the demonstrators' spirits.
GREEN GROWTH
In a small taste of his upcoming speech, Papandreou talked to his ministers Thursday about "creative agriculture, the Mediterranean diet, green growth and clean energy."
"Alongside the great battle we wage against the monsters of deficit and debt which we have inherited, we will increase our efforts towards developing human resources and education," he said. "Our goal is nothing less than to change Greece."
Last October, he capitalised on a wave of anger at scandals to trounce his conservative rival, Costas Karamanlis, who broke the tradition of making generous promises at the Thessaloniki fair, told Greeks he would freeze public sector salaries and went on to lose the election.
Analysts say this year Papandreou may offer some minor relief to the truly despondent, reveal a growth plan for next year and offer Greeks the prospect of a way out of the crisis.
"I expect nothing from the prime minister's speech, he is forced by the (IMF/EU) memorandum to take tough measures," said Nikoleta Makri, 58, a sales assistant in Athens. "We are desperate. We lose customers every day and we are all afraid for our jobs."
Consumption has been hit as public sector wages were cut by 15 percent, pensions by 10 percent, and value added tax increased by 4 percentage points to 23 percent.
The economy is set to contract by 4 percent this year and unemployment rose to 11.6 percent in July, from 8.6 the year before. Germany's Aldi, the world's biggest discount food retailer, and French retailer FNAC said last month they were leaving the Greek market because of the recession.
While applauded by international lenders for cutting spending, Greece's austerity measures are hurting revenues. Data issued Thursday showed the government was behind for the first time in its target to cut the deficit by 39.5 percent this year.
"The market is pretty worried about whether the government will find the golden medium to kick start the economy and secure the revenues that are missing," said an Athens based analyst. "Only if they manage to find this golden medium, will the country be able to get out of this tunnel."
(Additional reporting by Harry Papachristou and Angeliki Koutantou; editing by Andrew Dobbie)
