Athens burns as Greek austerity bill passes, avoiding default

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Athens erupted in flames, tear gas and pitched street battles between police and protesters as the Greek government pleaded for – and later won – a crucial parliamentary vote that will prevent the ailing country from defaulting next month on its crushing debt.

The centre of the capital city was shattered by violence as parliamentarians debated an austerity bill ahead of the early Monday morning vote. The government's goal was to complete the tally before the financial markets opened Monday morning.

The final tally was 199 votes in favour and 74 against in the 300-member parliament.

Even though the government, led by interim leader Lucas Papademos, handily won the vote, the anti-austerity protests are not expected to die away in the next few months.

For more than a year, Greece has been paralyzed by strikes and mass demonstrations, some deadly, as cutbacks demanded by international creditors kill economic growth and send the jobless rate soaring. The newest austerity program, the minimum requirement for a fresh €130-billion ($172-billion) bailout, could keep the economy in recession for some time – perhaps several years – at the risk of enflaming tempers.

The anti-austerity protest began peacefully in the late afternoon in Syntagma Square, facing the parliament buildings, but turned unruly quickly. The 5,000-man police army, provoked by flying bottles, stones and oranges plucked from trees, were quick to detonate tear gas canisters and stun grenades.

Fires gutted no fewer than five buildings, and as many as 12, according to late reports, in the downtown core. Streets were covered in rubble by rock-throwing protesters and overturned garbage bins were set on fire. By about 9 pm Sunday, local time, there were reports of about 50 to 100 injuries. One report said 40 police were injured, two seriously.

Tens of thousands of protesters were cleared from Syntagma Square, crushing into the side streets while the police pursued them with tear gas. Some protesters retaliated by throwing rocks and gasoline bombs. At one point, the police reportedly ran out of tear gas and called for new supplies.

The protests, which were among the most violent of the past year, were triggered by the deeply unpopular new austerity bill, which will see €3.3-billion of spending cuts piled on top of several older austerity programs. Millions of Greeks blame the austerity effort for the country's deep recession, which is about to enter its fifth year. The jobless rate recently hit 21 per cent and one in three young people is unemployed.

The austerity program was demanded by the "troika" – the European Commission, the International Monetary Fund and the European Central Bank – in exchange for the bailout. Absent the bailout, Greece would default on March 20, when the treasury must redeem €14.5-billion of sovereign bonds, and almost certainly leave the euro zone.

Sunday night's Yes vote in parliament will also trigger a debt-crunching effort that will see private bond holders (largely European banks) lose about 70 per cent of the value of their investment so that Greece can slice about €100-billion from its national debt load.

Mr. Papademos urged the 300 members of parliament, dozens of whom were either wavering ahead of the vote or had decided against supporting the austerity measures, to vote Yes. The alternative – default and exodus from the euro zone – would destroy the country, he said.

"We are looking the Greek people straight in the eye with full knowledge of our historical responsibility," he said Sunday in a televised address. "The social costs that come with these measures are contained in comparison to the economic and social catastrophe that will follow if we don't adopt them."

Most Greeks were divided on the vote. Some said that while continued austerity is painful, it is the harsh medicine required to overhaul the country's sclerotic economy and end the sense of entitlement that has created a bloated and inefficient civil service. "The back of the entitlement mentality has to be broken," said Konstantinos Katsigiannis, the Athens lawyer who is president of the Hellenic-Canadian Chamber of Commerce.

Some Greeks said the economy faced destruction regardless of the vote's outcome. "If they vote yes or no the result will be the same," said Peter Makridis, 37, a computer salesman. "We will be dead in six months either way. This country is bankrupt already."

Anger at the government was endemic among Greeks. "I think we should stay in Europe but all the politicians who destroyed this country should leave," said Katerine Apostolaki, 20, a computer sciences student who had joined the protesters.

The austerity measures demanded are equal to about 7 per cent of gross domestic product over three years. The cutbacks would see 15,000 government jobs disappear this year and ten times that many by 2015. The minimum wage would fall by 22 per cent, though first-time workers would see their minimum wage fall by 32 per cent.

Pensions, pharmaceuticals and the military would all be cut back while hundreds of cash-burning government organizations and corporations would be shuttered or privatized.

In a phone interview Sunday afternoon before the parliamentary vote, Andonis Spyridon Griorgiadis of the LAOS party – the smallest in the ruling three-party coalition – said that "Greece faces a very critical moment today."

LAOS had ordered its 16 members to vote against the austerity-for-bailout measures, but Mr. Griorgiadis broke ranks and vowed to vote in favour. "I think we should do whatever it takes to stay in the euro zone," he said. "We cannot go out. Our economy is too interconnected with Europe to leave."

He said the political landscape will change in the coming months. There were strong rumours Sunday of a cabinet shuffle Monday, and a spring election is expected. "We will have a new political system," he said. "The left will become more popular but the centre-right parties will hold power."