Early Monday morning, after three days of intense negotiations, the Greek government approved the latest austerity measures demanded by other EU nations, the International Monetary Fund (IMF) and the European Central Bank (ECB) by a vote of 199 to 74. In return, they get the latest bailout of $171 billion that nation needs in order to avoid default on March 20th, when a $19.1 billion payment on its debts is due–if EU finance ministers approve the accord when they meet on Feb. 15. Greek Prime Minister, Lucas Papademos, who addressed the nation on Saturday night, had urged the Cabinet to approve the deal, warning of “social explosion, chaos” if it failed.
“We are a breath away from ground zero,” Mr. Papademos said in a televised address to the nation ahead of the critical vote, further noting that the envisioned austerity program will “restore the fiscal stability and global competitiveness of the economy, which will return to growth, probably in the second half of 2013.”
It’s been a tough sell. More than 3,500 people converged on Syntagma Square in Athens Saturday, marking the second day of protests and a general strike. Hundreds of riot police stood guard as a result of clashes that erupted during rallies on Friday, one of which illuminated the almost schizophrenic mindset that has arisen among the Greeks themselves: Greece’s largest police union, representing more than two-thirds of Greek policemen, threatened to issue arrest warrants for officials from Greece’s EU and IMF lenders because of their demands for the next round of austerity measures. “Since you are continuing this destructive policy, we warn you that you cannot make us fight against our brothers. We refuse to stand against our parents, our brothers, our children or any citizen who [protest and demand] a change of policy,” said a letter obtained by Reuters.
After Greece’s Parliament approved the measures, the violence got even worse. In Athens, a crowd estimated at over 100,000 vented their frustration. Rioters destroyed or seriously damaged 93 buildings and least 45 others were burned, including nine listed as national heritage sites. More than 150 stores were looted or smashed. On Monday morning, clouds of tear gas used to disperse the rioters still hung in the air, traffic lights at many major intersections were out after being smashed, and cleanup crews gathered up as much as 40 tons of broken marble and rocks from the streets of the center, while railings, drainage covers and paving stones from sidewalks also suffered extensive damage
Riots spread to the cities of Thessaloniki, Patraas, the islands of Corfu and Crete, and towns in central Greece as well. Marfin bank, the same building where three bank workers died during similar uprisings on May 5, 2010, has been burned to the ground. Two central branches of the National Bank of Greece and Eurobank EFG were also firebombed. More than 170 people were injured, with 106 police needing medical care after being assaulted by gasoline bombs, rocks and other objects hurled at them, while 70 protesters were also hospitalized. 74 people were arrested and an additional 92 were detained.
All of the mayhem has been engendered by the latest austerity measures that call for a 22 percent cut in the minimum wage to $742 per month, $397 million in pension reductions, and the elimination of 150,000 public sector jobs over the next three years. Furthermore, the approval of the measures requires a written commitment from the leaders of Greece’s two main parties, the PanHellenic Socialist Movement and conservative New Democracy party, to fully implement the program, regardless of who wins the general election expected to take place in April. “Greek promises aren’t enough for us anymore,” said German Finance Minister Wolfgang Schaeuble, echoing the demands of the European Union and International Monetary Fund, and underscoring the reality that Greece failed to implement the fiscal and structural reforms that were part of the $145 billion bailout they received in 2010.
The ability to continue down the path of austerity after the April election is critical. It is highly unlikely that public anger will be dissipated by that time, and EU leaders must be assured that, no matter how the people vote, the austerity program will remain on track. That assurance is necessary to complete the other part of the debt deal, a bond swap in which private-sector investors take a 70 percent “haircut” that will reduce Greece’s outstanding debt by $132 billion. The new bonds will have an average interest rate of 3.5 percent for bondholders, along with a warrant linked to Greek growth. German Finance Ministry spokeswoman Marianne Kothe says the bond swap deal must be completed before EU ministers finalize the bailout.
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