Greek parliament passes austerity plan after riots rage

ATHENS — After violent protests torched dozens of buildings in Athens, Greece’s parliament voted early Monday to approve a package of tough austerity measures demanded by the country’s foreign lenders in exchange for new loans to prevent Greece from default on its debt.

Although it comes after days of intense debate and the resignation of several ministers in protest, the vote on the austerity measures was ultimately not close: 199 for and 74 against, with 27 abstentions or ballots whites. Parliament also gave the government the power to sign a new loan agreement with foreign lenders and approve a broader deal to reduce the amount Greece has to repay to its bondholders.

New austerity measures include, among other things, a 22% cut in the benchmark minimum wage and 150,000 government layoffs by 2015 – a bitter prospect in a country ravaged by five years of recession and with unemployment at 21 % and rising.

But the chaos on the streets of Athens, where more than 80,000 people demonstrated on Sunday, and in other cities across Greece reflected growing fear – certainly among Greeks, but also among economists and perhaps even officials. Europeans – that the pointed belt – the tightening and the bailout money it brings will still not be enough to prevent the country from falling into a precipice.

Angry protesters in the capital threw stones at police, who responded with tear gas. After dark, protesters threw Molotov cocktails, setting fire to more than 40 buildings, including a historic theater in downtown Athens, the worst damage in the city since May 2010, when three people were killed when protesters set fire to a bank. There were clashes in Salonica in the north, Patra in the west, Volos in central Greece and on the islands of Crete and Corfu.

Greece and its foreign lenders are locked in a dangerous stalemate over the future of the nation and the euro. Until recently, a Greek default and exit from the Eurozone was considered unthinkable. Now, although experts say the European Union is unprepared for a default and doesn’t want one, the momentum has shifted from trying to save Greece to trying to contain the damage if they do. turn out to be unrecoverable.

“They are trying to lay the groundwork for it, to try to limit the contagion of it,” said Simon Tilford, chief economist at the Center for European Reform, a research institute in London. Yet, he added, letting Greece go would set a dangerous precedent, and it would be “fanciful” to think otherwise.

Greece’s lame economy is running large trade and budget deficits, and only the European Central Bank, the European Commission and the International Monetary Fund – known collectively as the Troika – are willing to lend the nation the money she needs to stay afloat. The troika is demanding more concessions to appease Germany and other northern European countries, where bailing out Greece is a tough sell to voters. For its part, Greece is trying to preserve social and political cohesion in the face of growing unrest, political extremism and a devastated economy that is set to worsen with more austerity. And the feeling is growing here and abroad that the troika’s strategy for Greece is failing.

Leaders of two of the three main political parties in Prime Minister Lucas Papademos’ caretaker coalition government – the Socialists and the centre-right New Democracy party – agreed on the new round of austerity after days of debate tensions, maneuvers and threats. The leader of the third, the right-wing Orthodox Popular Rally, refused to endorse the measures and later withdrew from the coalition.

During Sunday night’s debate ahead of the vote, Mr Papademos called on lawmakers to do their “patriotic duty” and pass the measures, saying they would save Greece from bankruptcy in March, when a bond issue comes in maturity that Greece will not be able to repay without foreign aid.

In a sign of how the crisis has frayed the political order in Greece, the three main political parties have all moved quickly to expel lawmakers who broke ranks with the leaders in the vote.

Mr. Papademos is a former vice president of the European Central Bank who took office in November with a mandate to negotiate the new loan deal before new elections are held, possibly as early as April. He acknowledged on Sunday that the program “calls for sacrifices from a wide range of citizens who have already made sacrifices.” But the alternative, he said, “a disastrous default”, would be worse.

European Union finance ministers, who were due to approve the deals with Greece at a meeting in Brussels last Thursday, instead sent a vote of no confidence, asking Greece for an additional $400 million in spending cuts.

When they meet on Wednesday, they are expected to approve the measures and up the ante. One of the main topics of discussion should be the creation of an escrow account which would contain new funds loaned to Greece and use it first to pay creditors, before the Greek government can exploit it to d other purposes. The idea, backed by Germany and the Netherlands, could make further loans to Greece more palatable to German voters, but many Greeks see it as a fundamental loss of sovereignty and feel they are being pushed in poverty to appease the banks.

“Greece is going to become a protectorate,” Natalia Stefanou, 45, a shoe store worker, said on Sunday during a protest outside parliament. She said she hadn’t been paid since September and could soon lose her job altogether. “It’s not me who worries me, though,” she said. “I have two children aged 14 and 15. What kind of country are we going to leave them?”

Anti-German sentiment is also on the rise in Greece, where memories of the Nazi occupation during World War II are still vivid. “It’s worse than the 1940s,” said Stella Papafagou, 82, who wore a surgical mask at the protest to fend off tear gas. “This time, the government follows the orders of the Germans. I would rather die with dignity than with my head bowed.

European leaders, fearing that the Greek crisis could undermine efforts to help other eurozone countries such as Portugal and Spain, have been try directly or indirectly in recent days to portray Greece as an outlier, whose leaders failed to transform its troubled and corrupt state quickly enough. In an interview last week, Italian Prime Minister Mario Monti said that in the highly unlikely event of Greece defaulting, “there would be extremely strong political policy and political responses to prevent such a phenomenon goes beyond Greece”.

Similarly, Fabrizio Saccomanni, managing director of the Bank of Italy, told reporters last week, referring to the risk of “contagion”, that “market indications seem to suggest that this problem is considered minor”.

But others say it’s wishful thinking. “If one country in the monetary union can default, another can too – it’s a simple deduction that bank and hedge fund managers can deduct, no matter what Ms. Merkel or Mr. Sarkozy says,” said Costas Lapavitsas, economist. at the University of London, referring to German Chancellor Angela Merkel and French President Nicolas Sarkozy.

“Portugal and Ireland have unsustainable debt,” he said. “Put two and two together, and that’s four.”

Mr Lapavitsas, who called on Greece to go ahead and default on its own terms, added that it was “absolutely unacceptable that this huge amount of Greek debt which binds the country hand and foot is being dealt with by anonymous and obscure people”. technocrats and unelected.

While Greece has dug itself into a hole by borrowing beyond its means, as many claim, there is also a growing sense that the troika’s austerity regime of spending cuts and funding increases taxes buries Greece alive in this hole. “The reason why Greece is in this position is because of the strategy that the troika imposed on it,” said Mr Tilford, of the Center for European Reform.

“The IMF has never approached a country like this,” he said. “With so much austerity there would always be a huge devaluation too.”

Financial analysts said they expected investors to welcome news of the vote in parliament.

“It’s a break, it’s a relief,” said Milton Ezrati, senior economist and market strategist at Lord Abbett & Company. “But it’s short-lived and everyone knows it. We buy a few more months before the next set of problems.

Jerry A. Webman, chief investment officer and chief economist for Oppenheimer Funds, also sounded cautious.

“It doesn’t solve the problem,” Mr. Webman said, “but it gives everyone the political cover needed to look for ways to solve the real Greek problem, namely how to get the country and its economy back on a more stable footing. . ”

With more pay cuts and tax increases expected, Greeks are increasingly angry with their own lawmakers as well as the lenders’ troika.

“They all sold in there, they should be punished,” Makis Barbarossos, 37, an insurance salesman, said as he waved a cigarette towards parliament on Sunday. “We should put them in small unheated apartments with pensions at 300 euros and see, can they live like that? Can they live as they ask us to live?

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