June 5, 2011 / 6:45 PM / in 6 years

Greek austerity plan draws 80,000 to Athens square

ATHENS (Reuters) - Greek government plans for yet more austerity to satisfy its international lenders brought at least 80,000 protesters on to a central Athens square on Sunday to vent their fury at the nation’s plight.

With Athens struggling to avoid a debt default, the cabinet will discuss a medium-term economic plan on Monday which promises several years at least of extra budget cuts and faster privatisations, its side of a deal to get a second financial bailout in a year from the European Union and IMF.

Socialist Prime Minister George Papandreou will then present the plan to the political council of his PASOK party on Tuesday, his office said, before the cabinet clears it the following day and sends it to parliament.

Greeks are showing signs of reaching the limits of their endurance as budget cuts imposed under Greece’s first bailout a year ago have helped to push unemployment close to 16 percent.

Police said more than 80,000 people packed the main Syntagma square outside parliament on Sunday, although protesters accuse the authorities regularly of underestimating their numbers.

Protesters have gathered on the square every night for 12 days but Sunday’s was by far the biggest rally so far in the series that draws inspiration from similar protests in Spain.

On Sunday, some banners also evoked the Arab Spring movement to oust authoritarian rule in the Middle East and North Africa.

“From Tahrir Square to Syntagma Square, we support you!” read one banner raised above a sea of splayed hands waved at the parliament building -- a highly offensive gesture for Greeks.

Other banners showed helicopters in an apparent reference to Egyptian President Hosni Mubarak’s flight from Cairo in February after weeks of popular protests on the city’s Tahrir Square.

DON‘T ROCK THE BOAT

Papandreou has used his parliamentary majority to ram through successive rounds of austerity including cuts to pensions and civil servants’ salaries. But faced with the popular anger, some PASOK lawmakers are becoming uneasy.

A group of 16 wrote to the prime minister on Thursday demanding a full party debate on the medium-term plan as “a matter of patriotism and democracy.”

But Interior minister Yannis Ragousis warned that rocking the boat could lead to early elections, which opinion polls suggest would lead to political stalemate, raising the risk that the new bailout deal with the EU and IMF might unravel.

“Anyone who drives the nation toward elections now will be effectively giving it the last push over the cliff,” Ragousis told Sunday’s edition of the Realnews newspaper.

German news magazine Der Spiegel reported on Sunday the new bailout could end up costing more than 100 billion euros, if Athens still needs foreign aid in 2013 and 2014.

Spiegel cited estimates by experts from the German Finance Ministry and the “troika” of the EU, International Monetary Fund and European Central Bank. In Berlin, the finance ministry declined to comment on the weekly’s report.

Greece agreed its first, 110 billion-euro, bailout a year ago. But this assumed that it could resume borrowing commercially early next year, which now appears inconceivable.

So far, Athens has received 43 billion euros under the first bailout, although it urgently needs another 12 billion which had been due in late June to cover debt repayments and for its day-to-day running costs. The troika said on Friday that money should now be forthcoming in July.

Euro zone finance ministers and the IMF board must still back the new bailout, which would supersede last May’s rescue.

It is expected to demand commercial creditors share some of the cost of Greece’s huge funding needs. A source close to talks on the bailout involving EU officials in Vienna last Thursday said it would involve some participation of private investors.

The ECB opposes any attempt to cut the overall value of creditors’ bond holdings, known as a haircut, fearing this would badly hurt banks which hold Greek debt and provoke a violent reaction on international financial markets.

However, creditors may be asked to buy new Greek bonds when old ones mature, to avoid Athens having to produce more money.

In Germany, which funds much of the bailouts, a conservative politician was unmoved by the Athens protests.

“We can’t let ourselves be influenced by the demonstrations in Greece,” said Volker Kauder, an ally of German Chancellor Angela Merkel.

Germany was due to put up 24.4 billion euros of the 110 billion total of the original rescue. “Greece is trying, but its efforts are insufficient,” Kauder, who leads the Christian Democrat party in parliament, told Bild newspaper.

Additional reporting by Erik Kirschbaum in Berlin; writing by David Stamp; editing by Ralph Boulton

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