President Carolos Papoulias: Greece stands on the edge of the abyss
ATHENS, Greece – Rioting over harsh austerity measures left three people dead in a torched Athens bank and clouds of tear gas drifting past parliament, in an outburst of anger that underlined the lo
ATHENS, Greece – Rioting over harsh austerity measures left three people dead in a torched Athens bank and clouds of tear gas drifting past parliament, in an outburst of anger that underlined the long and difficult struggle Greece faces to stick with painful cutbacks that come with an international bailout.
The deaths were the first during a protest in Greece in nearly 20 years.
Fear that the bailout won’t stop the debt crisis from spreading to other financially troubled EU countries like Portugal and Spain intensified amid the violence Wednesday, as credit ratings agency Moody’s put Portugal on watch for a possible downgrade.
The euro sank, dipping below $1.29 for the first time in over a year, on fears of crisis contagion and concerns that political upheaval might keep Greece from keeping its end of the bailout bargain.
Greece faces a May 19 due date on debt it says it can’t repay without the help. The new government cutbacks, which slash salaries and pensions for civil servants and hike consumer taxes, are being imposed as condition of getting a euro110 billion package of rescue loans from the International Monetary Fund and the other 15 European Union countries that use the euro as their currency.
Many Greeks realize some cutbacks are necessary to pull their country, which has a massive debt of euro300 billion, back from the brink of default, and reaction until now had been relatively muted by Greece’s volatile standards. But with people beginning to feel the pain of austerity measures, anger boiled over.
Although violent demonstrations are commonplace in Greece, they usually takes the form of set-piece clashes between anarchist youths and police and rarely lead to serious injuries. The deaths shocked public opinion and could affect future demonstrations.
Economists say Greeks face years of living with less to even have a chance to avoid national bankruptcy.
An estimated 100,000 people took to the streets during a nationwide general strike that grounded flights, shut all services and pulled news broadcasts off the air.
Hundreds of demonstrators — including far right wing supporters — broke away from the marches and tried to storm parliament, shouting “thieves, traitors.” At the opposite end of the political spectrum, groups of anarchists hurled Molotov cocktails and ripped-up paving stones at buildings and police, who responded with barrages of tear gas.
Three bank workers — a man and two women all aged between 32 and 36 — died of smoke inhalation after demonstrators torched their bank, trapping them. As their colleagues sobbed in the street, four others were rescued from a balcony.
A senior fire department official said demonstrators prevented firefighters from reaching the burning building.
“Several crucial minutes were lost,” the official said on condition of anonymity pending an official announcement. “If we had intervened earlier, the loss of life could have been prevented.”
Fifteen civilians and 29 police were injured in what Civil Protection Minister Michalis Chrisohoides called “a black day for democracy.” Twelve people were arrested in Athens and another two in the northern city of Thessaloniki, which also saw clashes between police and demonstrators.
“I have difficulty in finding the words to express my distress and outrage,” President Karolos Papoulias said. “The big challenge we face is to maintain social cohesion and peace. Our country came to the brink of the abyss. It is our collective responsibility to ensure that we don’t step over the edge.”
Prime Minister George Papandreou insisted that his Socialist government had no choice but to implement harsh austerity measures.
“A demonstration is one thing and murder is quite another,” he said in Parliament during a session to discuss the spending cuts. Lawmakers held a minute of silence for the dead.
“There was only one other solution — for the country to default, taking the citizenry with it. And that would not have affected the rich, it would have affected workers and pensioners,” Papandreou said. “That was a real possibility, however nightmarish.”
In Brussels, EU officials desperately tried to calm market fears that Greece’s debt crisis was spreading, insisting it was a “unique case” combining profligacy and tampered accounts. EU President Herman Van Rompuy insisted the growing debt problems in Spain and Portugal had “absolutely nothing to do with the situation in Greece.”
“Greece is a unique and particular case in the EU” because of its “precarious debt dynamics” and because it “has cheated with its statistics for years and years,” EU Commissioner Olli Rehn said.
German Chancellor Angela Merkel urged lawmakers on Wednesday to speedily approve their country’s share of the loans to Greece. As Europe’s largest economy, Germany will provide euro8.4 billion ($10.8 billion) in 2010 and up to euro14 billion more over 2011 and 2012, according to the plan.
“Nothing less than the future of Europe, and with that the future of Germany in Europe, is at stake,” Merkel told lawmakers. “We are at a fork in the road.”
Merkel’s government had insisted that Greece agree to new austerity measures before Germany committed to financial assistance — a stance that drew criticism of foot-dragging. Merkel had appeared to want to delay action until after a local vote in Germany this Sunday, but ratings agency Standard and Poor downgraded Greek bonds to junk status last week, deepening the crisis.
The shocks from Greece have shaken world markets and raised questions about whether the rally in stocks since they hit bottom in March 2009 can continue.
David Joy, chief market strategist for Columbia Management, a U.S. manager of $341 billion in stocks, bonds, cash and other investments, warned against complacency over the U.S. economic recovery and said this week’s events in Greece and Europe “should serve as a reminder that the ramifications of the financial crisis are still being felt.”
“Most of these lingering problems relate to the fact that excessive amounts of debt have been accumulated prior to the financial crisis. It’s going to take time for these to be worked through,” he said.
The outcome is a flight to safety, in which the dollar rises and money leaves riskier and economically more sensitive assets such as stocks and commodities.
Even with the bailout, some economists think Greece could eventually default on or restructure its debts because economic growth is expected to be poor over the next several years, hurting government revenue. Some also fear the austerity measures insisted upon by the EU and IMF could make prospects for growth even worse in the name of paying down debt.
The new austerity measures are to be voted on in Parliament Thursday. The Socialists hold a comfortable majority and the bill is expected to pass.