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Greek austerity vote wins praise amid flames

13 February 2012, 21:45 CET
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Greek austerity vote wins praise amid flames

Lucas Papademos - Photo EU Council

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

German Chancellor Angela Merkel said the successful parliamentary vote was "a very important step" towards re-floating the Greek economy but stressed there "cannot be any changes" to conditions imposed by eurozone partners.

With Athens bearing the scars of some of the most violent protests seen 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 imposed on Greece in exchange for the bailout range from completing a restructuring of the country's existing debts to delivering on a promised programme of privatisations.

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

Eurozone finance ministers, who are to reconvene in Brussels on Wednesday night, will want written guarantees from Greek party leaders that the latest austerity measures will be implemented -- even after elections.

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

There also remain queries of the provenance of 625 million euros in spending cuts, with an EU source suggesting Greece's proportionately high defence spending would be a likely target.

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.

But many hurdles remain before Greece can call in actual money, and Wednesday's meeting is unlikely to overcome more than the easiest.

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

The vote in Athens also appeared to give Italy a boost when the government in Rome raised 12 billion euros in a bond auction, at easier borrowing rates.

But Fitch Ratings late Monday lowered the credit rating of Spain's four largest banks, and China too cautioned that the eurozone debt crisis remains at a "critical juncture."

"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," said 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.

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

Overall, 170 businesses in Athens sustained damage, with police chief Ioannis Lioungas adding that 15 people had to be rescued from a burning bank.

Three people -- one of them a pregnant woman -- died inside another fire-bombed bank branch during protests in 2010.

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

Finance Minister Evangelos Venizelos had told the 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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