Greece’s future uncertain as violence erupts on streets

By NICHOLAS PAPHITIS AND DEREK GATOPOULOS
Published on Saturday 11 February 2012 01:50

GREECE’S future in the eurozone grew increasingly precarious last night as violence erupted on the streets of Athens and dissent grew among its lawmakers after European leaders demanded deeper spending cuts.

The country’s beleaguered coalition government promised yesterday to push through the tough new austerity measures and rescue a crucial €130 billion (£109bn) bailout deal, as six members of the cabinet resigned.

Prime minister Lucas Papademos said he would “do everything necessary” to ensure parliament passes the new austerity measures that would slap Greeks with a minimum wage cut during a fifth year of recession.

“It is absolutely necessary to complete the effort that began almost two years ago to consolidate public finances, restore competitiveness and economic recovery,” Mr Papademos told an emergency cabinet meeting.

Debt-stricken Greece needs the bailout money before a €14.5bn bond deadline on 20 March to strike a vital debt-relief deal with bond investors.

The prime minister said the bailout and a related debt-reduction deal with private creditors would return Greece to growth next year.

He warned: “A disorderly default would cast our country into a catastrophic adventure. It would create conditions of uncontrollable economic chaos and social explosion.

“Greeks’ standard of living in the event of a disorderly default would collapse, and the country would be swept into a deep vortex of recession, instability, unemployment and penury. These developments would lead, sooner or later, to exit from the euro.”

A small right-wing party in Mr Papademos’s coalition said it would not back the new measures and four of its officials in the cabinet resigned, including the country’s transport minister.

Two socialist cabinet members have also quit.

Greece has promised to approve the new austerity measures by late tomorrow, despite deep public resentment.

Thousands took to the streets of Athens as unions launched a two-day general strike against planned austerity measures, hours after the bailout was put in limbo by its partners in the 17-nation eurozone.

Mr Papademos had hoped some of the heat had been taken out of the crisis after leaders agreed on Thursday to a raft of austerity measures.

Finance ministers from the other 16 eurozone states put up a roadblock later in the day by insisting Greece had to save an extra €325 million, pass the cuts through a restive parliament and guarantee in writing that they will be implemented even after planned elections in April.

Clashes broke out in Syntagma Square, outside parliament, yesterday as dozens of youths threw fire bombs and stones at police, who responded with tear gas. No arrests or injuries were reported.Police said 7,000 people took part in the demonstration.