After day of tumult, Greek cabinet backs austerity plan

By Christine Pirovolakis Feb 10, 2012, 23:24 GMT

Athens - Greece's cabinet approved a new austerity agreement late Friday, facing down massive angry public protests and ignoring the resistance by a handful of Cabinet members who resigned over deeper spending cuts demanded by European leaders.

Determined to avoid a chaotic default, Greek Prime Minister Lucas Papademos said he was determined to push through the tough new austerity measures, in spite of the political turmoil rocking the country.

The plan is to be put to a vote in the 300-member parliament on Sunday.

Five Greek cabinet members, including the transport minister and the deputy foreign minister, handed in their resignations.

A total of six members of the 48-strong cabinet have now quit in the past two-days alone. In addition, George Karatzaferis, leader of the right-wing LAOS party that is backing the three-party ruling coalition, said he would withhold his support for the new measures.

The wave of resignations came a day after eurozone finance ministers refused to agree to a second bailout for Greece, saying the country had not yet met all of their demands.

A group of angry rioters broke away from a peaceful demonstration of more than 11,000 people, setting fire and clashing violently with police.

European leaders have given Athens until next week to provide guarantees on the austerity measures and on the economic reforms that Greek leaders had promised in return for funding.

Addressing a cabinet meeting, Papademos told ministers that if any of them were to vote against the new measures in a parliamentary ballot, they would have to leave the ruling coalition.

'A disorderly default would trigger economic chaos and social explosion,' he said in a televised opening address to the cabinet.

'It is necessary to complete the effort that began almost two years to consolidate public finances, restore competitiveness and economic recovery,' he said hours before the cabinet approved the new austerity agreement.

Papademos said the bailout deal with private creditors would return Greece to growth next year and deliver a 4.5 per cent primary surplus in 2012, better than an earlier official prediction of 1.1 per cent of GDP.

If the Greek government continues to fail to satisfy the austerity demands of the European Union and the International Monetary Fund (IMF), it will not receive a 130-billion-euro (172-billion-dollar) aid package, risking a chaotic default when it faces a bond repayment in March.

The cuts include a 22 per cent drop in the minimum wage, public sector layoffs and spending cuts to health, social security and defense budgets.

Faced with rising dissent, Papademos was reported to be considering a cabinet reshuffle following the parliament vote, replacing his ministers with technocrats, as Italy has done.

Meanwhile, the anger on the streets of the Greek capital grew to alarming levels.

Workers went on strike and riot police clashed with hundreds of black hooded rioters, with the demonstrations expected to continue until Sunday.

In Germany, Chancellor Angela Merkel defended the costly bailout plans for Greece in a meeting with parliamentary leaders, saying it was the 'path of the least damage,' since default scenarios had 'uncontrollable' risks attached.

German Finance Minister Wolfgang Schaeuble defended the decision to withhold a decision on Greek aid for another week. 'It is not about torturing the Greeks,' he told legislators. Rather, the aim was to return Athens to a course offering Greeks an 'adequate life.'

The demonstrations in Athens coincided with a 48-hour nationwide strike by Greek public and private sector workers. The walkout paralysed public transport and forced ferries to remain moored at ports around the country.

Government offices, banks, schools, courtrooms, museums and archaeological sites remained closed, while hospitals operated with emergency staff.

The anger sparked by the austerity measures was highlighted Friday by a letter from the Greek police union, in which it said it was seeking an arrest warrant for the country's international lenders.

'You are jeopardizing Greece's democracy and the survival of its people,' the letter said. Reports said the union was seeking the arrest warrant from the Greek state attorney.

Thousands of 'Wanted' flyers were also distributed around the Greek capital, offering an award of 1 euro to anyone who apprehends officials from the EU, the IMF and the European Central Bank.