Discord over debt deal multiplies

A policeman in riot gear tries to avoid a stone thrown by a protester during clashes in Athens, where at least eight officers and two members of the public were injured. At least six people were arrested. ASSOCIATED PRESS Enlarge

ATHENS -- Greece's future in the euro zone came under renewed threat Friday as protests turned violent and dissent grew among its lawmakers after European leaders demanded deeper spending cuts.

Leaders of Greece's interim coalition government promised to push through tough austerity measures and rescue a crucial $170 billion bailout deal after six members of Prime Minister Lucas Papademos' cabinet resigned.

Mr. Papademos promised to "do everything necessary" to ensure Parliament passes the austerity measures that would slap Greeks with a minimum wage cut during a fifth year of recession. He also vowed to replace any other cabinet members who do not back his efforts.

Draft legislation for the austerity measures was sent to Parliament after the five-hour cabinet meeting ended.

Greek officials promised to approve the austerity measures as emergency legislation by late Sunday, despite deep public resentment.

Clashes erupted outside Parliament between dozens of youths and police in riot gear. Police said eight officers and two members of the public were injured; six suspected rioters were arrested.

The violence occurred as more than 15,000 people took to the capital's streets after unions began a two-day strike that disrupted transport and other public services and left state hospitals running on emergency staff.

Scores of youths, some in gas masks, used sledge hammers to smash paving stones in Athens' main square before hurling the rubble at riot police.

Debt-stricken Greece does not have the money to cover a bond repayment March 20 and must reach a debt-relief deal with private bond investors before then.

Mr. Papademos said the bailout and the deal with private creditors would return Greece to growth next year, and deliver a 4.5 percent primary surplus in 2012 -- better than an earlier official prediction of 1.1 percent of gross domestic product.

"A disorderly default would cast our country into a catastrophic adventure. It would create conditions of uncontrollable economic chaos and social explosion," he warned.

"Greeks' standard of living in the event of a disorderly default would collapse, and the country would be swept into a deep vortex of recession, instability, unemployment, and penury. These developments would lead, sooner or later, to exit from the euro.

"Either we will achieve an agreement that will set the country on a new course, or, if we backtrack, in yet another historic display of cowardice, we will head for collapse."

His comments kicked off what is expected to be a long and chaotic weekend of brinkmanship, with Greek politicians fighting for survival in the face of unpopular austerity measures and European leaders demanding more concessions.

Greece's foreign lenders -- the European Commission, European Central Bank, and International Monetary Fund -- have demanded sweeping austerity measures in exchange for the $170 billion Greece needs to avoid default. The lenders made passage of the measures a condition for sealing a deal in which private creditors will take voluntary losses of up to 70 percent of Greece's debt.

But nearly two years after Greece's first bailout, both Athens and its lenders are at a dangerous impasse. Europe has lost confidence Greece's government has the will or capacity to follow through on commitments to structural changes.

Greeks, whose standard of living is dropping precipitously with no end in sight, have lost confidence a bailout will save the country from default. With so many variables and little time, some experts said any outcome was possible, from disorderly default and chaos to a pact and temporary calm.

For now, both Europe and Greece appear to lack a viable Plan B.

Behind closed doors in Brussels Thursday, European finance ministers jolted Athens by insisting it find $428 million more in savings -- to fill a budget hole created by political leaders' refusal to slash supplemental pensions -- before their next meeting, expected Wednesday.

The proposed austerity measures are unpopular in Greece, where politicians are positioning themselves for elections as soon as April, although two of the three parties in the coalition want to delay them until 2013.

Adding to the anxiety surrounding the talks, the leader of the smallest of three parties in the governing coalition said Friday he would vote against the austerity package Greek lawmakers agreed to Thursday. "The creditors are asking for 40 years of submission," said Georgios Karatzaferis, who heads the right-wing Popular Orthodox Rally. "Greece will not give itself up."

His party controls 16 seats in Parliament, not enough to scuttle the deal if most of the coalition's other members, the Socialists and New Democracy, support it.

"Of course we do not want to be outside the E.U., but we can get by without being under the German jackboot," he said. "I would rather starve."

The government is expected to pass the new package.

But several legislators have indicated they object to certain measures -- chiefly wage cuts -- and may vote against them. The cuts include a 22 percent drop in the minimum wage and plans to fire 15,000 civil servants in 2012, at a time when the jobless rate is over 20 percent.