Quantcast

Greece passes austerity, but riots seize capital

By Elena Becatoros

Associated Press

Published: Wednesday, June 29 2011 1:05 p.m. MDT

Protestor throws a stone against police at Syntagma square in front of the Greek Parliament in central Athens on Wednesday, June 29, 2011. Greek deputies are to vote later Wednesday on a deeply unpopular austerity bill that has provoked days of rioting in the streets of Athens, with the result of the vote determining whether the country can avoid a potentially disastrous financial default in the coming weeks.

Thanassis Stavrakis, Associated Press

ATHENS, Greece — Greece fended off a bankruptcy that would have roiled global markets and threatened the future of the euro when lawmakers on Wednesday backed controversial austerity measures in the face of violent protests.

Investors cheered the bill — which aims to cut spending and raise taxes by €28 billion ($40 billion) and raise €50 billion ($71 billion) in privatizations over five years — but, in Athens, the mood was dark. In a haze of tear gas, protesters hurled anything they could find at riot police and tried to blockade the Parliament building.

A Greek default would threaten the viability of the euro, the EU's common currency, and send shock waves through global markets similar to those that kicked off the global financial meltdown after the collapse of Lehman Brothers in 2008.

While world markets rose on the news that the bill passed, Greece is not yet out of the woods. The bill — along with another that must be passed Thursday on implementing the austerity package — will release the next €12 billion ($17 billion) installment of a €110 billion ($157 billion) international bailout from the European Union and the International Monetary Fund. Eurogroup head Jean-Claude Juncker indicated after the vote that Greece would get the fifth batch of its bailout loans.

But many Greeks complain they have already paid dearly in a year that has seen public sector salaries and pensions cut and unemployment rise to above 16 percent.

"This is bad, the country will be sold for a piece of bread," said Dimitris Kostopoulos, a 48-year-old insurer who was protesting Wednesday. "There were many other more appropriate alternatives to this. Parliament has once again betrayed us."

The next installment Greece hopes to get will only see it through September, leaving open the question of how the country, burdened with piles of debt, will right itself.

On Sunday, eurozone finance ministers will meet in Brussels to make progress on a second bailout for Greece that is hoped will address more long-term problems. As part of that plan, banks are expected to share some of the burden, possibly by rolling over Greek bonds that they hold, as French banks have already volunteered to do.

Prime Minister George Papandreou has said the second bailout will be roughly the same size as the first.

But many economists expect even that reprieve will not be enough, and Greece will need a more significant restructuring of its debt.

"We must avoid the country's collapse with every effort," Papandreou said before the vote. "Outside, many are protesting. Some are truly suffering, others are losing their privileges. It is their democratic right. But they and no one else must never suffer the consequences ... of a collapse."

But the specter of continued protests could undermine the government's ability to implement the harsh austerity measures, which slap taxes on even some of the lowest-paid Greeks and raise consumer taxes during a recession.

"While approval of the package is an essential first step toward Greece getting the much-needed funding it needs from the EU/IMF to meet its upcoming financial obligations, they are not out of the water just yet," said Carl Campus, an analyst at BMO Capital Markets.

As lawmakers voted, stun grenades echoed across the square outside Parliament and acrid clouds of tear gas and orange and green mist from smoke bombs and flares hung in the air. Several banks and storefronts were smashed, while a Socialist dissenter who backed the government at the last minute, Alexandros Athanassiadis, was briefly assaulted by protesters after leaving Parliament on foot.

Get The Deseret News Everywhere

Subscribe

Mobile

RSS