Monday, February 13, 2012

Greek austerity vote wins praise amid flames

Greece took a key first step towards averting bankruptcy and securing a second bailout on Monday after lawmakers approved radical budget cuts despite street battles in pre-election Athens.

German Chancellor Angela Merkel said Sunday night's parliamentary vote was "a very important step" towards re-floating the Greek economy but stressed there "would not and cannot be any changes" to a string of conditions for aid imposed by eurozone partners.


With Athens bearing the scars of some of the most violent protests seen there in years, Merkel's Finance Minister Wolfgang Schaeuble added that measures including a 22-percent cut to the Greek minimum wage "are not about torturing anyone."

Other tough conditions to money being handed over range from completing a restructuring of the country's existing debts to delivering on a promised programme of privatisations.

All the while, the precise terms for invasive European Union "monitoring" of Greece's revenues and expenditure over the coming years still have to be hammered out.

But to begin with, as eurozone finance ministers ready to reconvene in Brussels on Wednesday night, there will have to be written guarantees from Greek party leaders that the latest austerity will be implemented -- even after elections.

These commitments "must be given by Wednesday," government spokesman Pantelis Kapsis said after announcing a long-anticipated April vote.

Athens needs to find another 325 million euros in spending cuts, which an EU source said would likely come from defence spending.

EU economic affairs commissioner Olli Rehn hailed "a crucial step forward towards the adoption of the second programme," referring to a 130-billion-euro ($171 billion) package of loans initially agreed in October.

Rehn said Greece had signalled a "determination" to end a "spiral of unsustainable public finances," which would in return unlock "unparalleled financial assistance from Greece's partners."

He said this would prove "a concrete expression of their continued solidarity and genuine concern" despite "unacceptable" violence that left dozens injured and a landmark Athens cinema in smouldering ruins.

China cautioned that the eurozone debt crisis was still at a "critical juncture."

However, markets rose, in Asia, in Europe and in early New York trade, after deputies defied 100,000 demonstrators in Greece's biggest cities to pass another round of stringent budget measures demanded by international creditors.

Amid concerns that the Greek crisis could once more infect other nations, the vote in Athens appeared to give Italy a boost when the government in Rome raised 12 billion euros in a bond auction, at easier borrowing rates.

Economists, though, warned that much still depends on how the measures are implemented after Greek citizens vote, regardless of pre-election pledges.

"Greece is a now a highly combustible mix of economic collapse, political corruption, social discontent and human suffering," said Sony Kapoor, head of Re-Define, a Brussels economic think tank.

"Considering the explosive situation in Greece," added Lutz Karpowitz of Germany's Commerzbank, "it would hardly come as a surprise if those opposing the reforms were to take control of the country."

An estimated 80,000 protesters gathered in Athens, police said, matching the biggest turnouts achieved against earlier austerity packages last year, while around 20,000 demonstrated in Greece's second city of Thessaloniki.

With thousands of police guarding the parliament, Greek Prime Minister Lucas Papademos warned before lawmakers voted: "If we collapse, we won't be able to fix anything anymore ... the package is the country's only hope."

Athens was coming to terms on Monday with scenes of devastation described as the worst for several years.

Rioters attacked "emblematic buildings, about 10 neo-classical edifices," the Athens city hall's top maintenance official Andreas Varelas told AFP.

"I am ashamed, it's hooliganism," lamented a 55-year-old security guard who took part in demonstrations that left 45 buildings burnt out and 67 people under arrest.

On Syntagma Square, which adjoins parliament and has become the focal point for the protests, emergency workers on Sunday braved a barrage of rocks and tear gas in addition to petrol bombs.

"By 2020 we will be the Germans' slaves," said 49-year-old engineer Andreas Maragoudakis.

Finance Minister Evangelos Venizelos told parliament that Greece would be forced to default if lawmakers did not back the austerity ordered by the EU and the International Monetary Fund.

Private creditors have still to finalise the bond swap that is intended to wipe out around 100 billion euros from Greece's 350-billion total debts.

Venizelos said the legal offer must be launched by Friday in order to have enough time to arrange payment of 14.5 billion euros in maturing debt on March 20.

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