Papademos Appeals to Greeks as Leaders Endorse Austerity

Greece's Prime MinisterLucas Papademos
Lucas Papademos, Greece's prime minister. Photographer: Kostas Tsironis/Bloomberg

Rioters set fire to buildings and battled police in downtown Athens as the Greek Parliament prepared to vote on Prime Minister Lucas Papademos’s austerity package to avert the nation’s collapse.

Ten fires were burning in central Athens including buildings housing a Starbucks Corp. cafe, a bank and a movie theater, a fire department spokesman said, speaking on the condition of anonymity in line with official policy. The blazes were near a bank that was set on fire in May 2010, killing three bank employees, during a general strike against Greece’s first bailout package.

“Today at midnight, before markets open, the Greek Parliament must send a message,” Finance Minister Evangelos Venizelos told lawmakers in Athens today as the final debate on the accord to secure a 130 billion-euro ($171 billion) second aid package got under way. “We must show that Greeks, when they are called on to choose between the bad and the worst, choose the bad to avoid the worst.”

Demonstrators, rallying against austerity measures including job cuts, tore up marble in front of parliament that they hurled with fire-bombs at police guarding the chamber. Officers in riot gear responded with tear-gas and flash grenades. More than 50 officers were injured in the violence, police spokesman Takis Papapetropoulos said by telephone. The Greek Health Ministry said in an e-mailed statement that 54 people had been taken to hospital. Police said 25 rioters had been detained.

‘Athens in Flames’

“We are seeing Athens go up in flames again,” Mayor George Kaminis, said in an interview on ANT1 television. “This must stop. What they are trying to do to Athens is what they are trying to do to the entire country.”

Papademos appealed to Greeks last night to support budget cuts needed to win the aid while leaders of the two biggest parties urged their lawmakers in parliament to pass the austerity bill today or risk financial meltdown.

The vote is tantamount to a vote on whether Greece wants to remain in the euro and is part of a fight to save the country, Venizelos told parliament.

‘Leave the Country’

“The message to the Greek government is they should leave the country, right now,” one protester, Dimitris Fokos, 49, unemployed, said. “They don’t represent the people anymore.”

Police estimated the crowd today at about 15,000, spokesman Papapetropoulos said.

With only weeks remaining before the country faces a 14.5 billion-euro bond payment, George Papandreou and Antonis Samaras, the leaders of the two largest parliamentary parties, urged support for the bill as lawmakers, with an eye on elections as early as April, bristled at measures such as a 22 percent reduction in the minimum wage, smaller pensions and immediate job cuts for as many as 15,000 state workers.

“We are looking the Greek people straight in the eye with full knowledge of our historical responsibility,” Papademos said in a televised address on the eve of the vote. “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.”

Debt Swap

The measures equal about 7 percent of gross domestic product over three years and include a debt swap that would shave 100 billion euros off more than 200 billion euros of privately held debt.

Police in Athens clashed with protesters on Feb. 10 after unions started a 48-hour strike against the austerity measures demanded by the so-called troika of international creditors monitoring Greece’s progress.

Five ministers resigned from Papademos’s interim government in the space of two hours on Feb. 10 instead of voting for the austerity measures. About 12 deputies from the New Democracy party may defy Samaras and oppose the bill, state-run television NET reported, without saying how it got the information. Another 20 from the socialist party will do the same, the broadcaster said.

Papademos’s interim government was formed three months ago with the express mandate of securing the second loan package. It was supported by three parties, Pasok, New Democracy and Laos, which gave him 253 votes in the chamber. Greece was granted its first package of aid in May 2010 worth 110 billion euros.

Schaeuble’s Warning

German Finance Minister Wolfgang Schaeuble told lawmakers in Berlin on Feb. 10 that Greece was missing deficit goals and needed to do more. Schaeuble, briefing lawmakers in Berlin on troika estimates relayed on Feb. 9, said current plans would leave Greece’s debt as high as 136 percent of GDP by 2020, according to two people in the meeting. That compares with the 120 percent foreseen in the second bailout. Debt was about 160 percent of GDP last year.

Schaeuble said it’s up to the Greeks to decide whether they want to stay in the euro area, the Welt am Sonntag newspaper reported.

“Greece will be saved in one way or another,” Schaeuble said. “But the country must do its homework to become competitive” either within the framework of a new aid program “or in another way that we actually don’t want.”

Greek Euro Exit

Erik F. Nielsen, UniCredit’s chief global economist, said in a note today that he keeps hearing investors say a Greek exit from the euro would be “better for all parties.”

“I am very confident that a Greek exit would be a disaster for Greek society,” Nielsen said. “For the rest of Europe I don’t think it’ll matter much (if at all) in the longer term, but I fear that a lot of people may be underestimating the short term risks to Europe of a Greek collapse.”

Officials from the European Commission, European Central Bank and International Monetary Fund, known as the troika, had proposed that euro-region finance ministers contribute 15 billion euros more “because the banks need more money,” Venizelos said yesterday in Athens.

The emergency euro-region talks broke up late on Feb. 9, with Luxembourg Prime Minister Jean-Claude Juncker saying Greece must turn budget cuts into law, flesh out 325 million euros in reductions and have major party leaders sign up to the program so they don’t retreat after elections. Another extraordinary meeting of euro finance ministers was set for Feb. 15.

Resolution of the talks, which started in July, would help contain the threat that speculators will target debt-saddled nations, including Italy and Portugal.

Assessing Greece

Venizelos said today that Greece will default without an agreement, and euro-area finance ministers must approve the Greek accord on Feb. 15. Officials from euro countries will assess Greece’s “prior actions,” which need to be completed before the second rescue package can be approved by teleconference on Feb. 14, he said.

Europe’s stance follows more than two years in which Greece failed to carry through promised reforms to tackle its uncompetitive economy and meet aid terms. The country blamed its shortcomings on a deepening recession now set to worsen, with figures last week showing unemployment jumping to 20.9 percent in November and industrial production declining.

Bondholders met separately in Paris on Feb. 9 to discuss accepting a debt swap for new 30-year bonds with an average coupon of as low as 3.6 percent. An agreement would slice 100 billion euros off more than 200 billion euros of privately held debt. Venizelos said the country needs to make a formal offer to private bondholders for a debt swap by Feb. 17.

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