Violence erupts in Athens over austerity package

 

ATHENS YESTERDAY witnessed its most serious unrest since the beginning of its financial crisis when a peaceful protest turned into a pitched battle between riot police and a small group of protesters.

The violence followed the Greek government’s passage into law of austere measures to balance its budget, including a higher VAT rate and public pay cuts.

Police say the group emerged from a section of the protest march sponsored by the Left Coalition, a breakaway communist party that has been accused of giving safe haven to anarchists. The group set upon about a dozen riot police guarding the council of state, one of Greece’s highest courts.

Witnesses say they isolated and badly beat up one officer, tore up marble steps for ammunition, and smashed plate glass windows on central avenues.

The measures passed by the Greek government aim to raise public revenue and reduce the budget deficit by four points this year, but there are concerns that the private sector will be affected.

A strike shut schools, hospitals, state media, public transport and at least one ministry. Flights were grounded for four hours. Labour unions and left-wing parties behind these mostly peaceful protests are scheduling another strike next Thursday to fight what they see as one-sided austerity.

“The demands of the market cannot translate into government policy. Society cannot take it,” said a statement by the General Confederation of Labour, Greece’s largest umbrella union. It is incensed that hedge funds can make money from misery in the real economy. “Once again, the government’s measures have struck at workers instead of big capital,” said Yannis Paparis (26), who works in private healthcare.

“Public health is being run down and people are being forced into private care. Public hospitals are desperately short-staffed. How much money was spent on useless government committees that could have gone to salaries?”

Meanwhile, Greek prime minister George Papandreou, on a tour of European capitals to shore up support for his new austerity plans, had talks in Berlin yesterday with Chancellor Angela Merkel, whose country is likely to be the biggest participant in any rescue deal. Mr Papandreou said political support and not EU money would best help his country survive its current economic crisis.

“We never asked for money, what we need is support of the EU and our European partners to get credit on better terms from the market.”

Mr Papandreou was speaking a day after Greece attracted heavy demand for the sale of an important bond issue, easing its cash problems for the moment. That in turn eased pressure on Dr Merkel to spearhead a financial rescue plan for the Greeks. The German leader praised Mr Papandreou for his government’s reform zeal in recent weeks. “He has taken the bull by the horns. We should stand by Greece, not put obstacles in its way,” she said. “We know in Germany how difficult it is to push through reforms, but we also know how important a step it is.”

Ahead of his arrival in Berlin, the Greek leader made clear that there was more than a shared currency at stake, but interlocking trade ties between Greece and Germany, and other EU partners.

“There is a clear [common] interest in the survival of the Greek economy; we don’t want to be the Lehman Brothers of Europe,” said Mr Papandreou to the Frankfurter Allgemeinenewspaper. In a nod to other euro zone members with financial problems, Mr Papandreou said that without aid Greece could become “the next but not the last victim of the crisis”.

“The European currency would be endangered if Greece failed and, in a domino effect, brought down other countries with it,” he said.

Berlin refuses to discuss publicly the possibility of euro zone assistance to Athens, but, privately, officials have run the numbers on several possible rescue strategies. One would allow German banks provide loans to Athens, backed by guarantees from Germany’s state-owned development bank, the KfW.

Another, mentioned by Mr Papandreou in Berlin yesterday, was to provide Greece with money by issuing a “eurobond”. But the Berlin government faces a series of barriers to aid: aside from the financial and political considerations around the euro zone, Dr Merkel’s hands are tied at home.

Berlin has itself breached euro zone debt guidelines, and with her Christian Democrats (CDU) facing a tight state election in two months, Dr Merkel is anxious to avoid any moves to arouse voter ire. Recent polls suggest two thirds of Germans are opposed to helping Greece financially; a slim majority say they are in favour of throwing Greece out of the euro zone if necessary.

Meanwhile, a leading German constitutional lawyer has suggested that German aid to Greece might be illegal. Prof Paul Kirchhof, a former judge at the constitutional court in Karlsruhe, said such aid might be stopped by Germany’s highest court as a breach of the Maastricht Treaty.