Greek Parliament Backs Austerity as Riots Continue

By Maria Petrakis, Natalie Weeks and Marcus Bensasson - Feb 13, 2012 7:31 AM GMT+0700

Greek Prime Minister Lucas Papademos won parliamentary approval for austerity measures to secure an international bailout after rioters protesting the measures battled police and set fire to buildings in downtown Athens.

A total of 199 lawmakers voted in favor and 74 against, Parliament Speaker Filippos Petsalnikos said in remarks carried live on state-run Vouli TV. When, on Nov. 16, Papademos won a mandate from the Parliament to implement budget measures and secure the bailout of 130 billion euros ($172 billion) he received the support of 255 lawmakers in the 300-strong chamber.

“It is up to us, our vote, whether the country will remain in the euro or be led to a disorderly default,” Papademos told parliament. “Voting for the economic program and opening the road for a loan accord sets the basis for the modernization and recovery of the economy.”

Passage of the austerity bill puts the spotlight on a meeting of euro-region finance ministers on Feb. 15 that must decide whether to approve the second aid package. Resolution of the negotiations, which started in July, would help contain the threat that speculators will target debt-saddled nations, including Italy and Portugal.

Emergency euro-region talks on Greece broke up on Feb. 9, with Luxembourg Prime Minister Jean-Claude Juncker saying the Greek government must turn budget cuts into law, flesh out 325 million euros in reductions and have major party leaders sign up to the program so they don’t retreat after Greek elections, probably in April.

Euro, Stocks Rise

The euro rose 0.3 percent to $1.3239 as of 7:58 a.m. in Tokyo from last week in New York. Australia’s S&P/ASX 200 Index rose as much as 0.4 percent in early Sydney trading today, climbing for the first time in three sessions, while futures on the Standard & Poor’s 500 Index advanced 0.4 percent, rebounding from a 0.6 percent selloff on Feb. 10.

European finance ministers and private creditors this week will decide on a plan to shepherd Greece through a 14.5 billion- euro bond payment bond payment next month. Still, German Finance Minister Wolfgang Schaeuble told German lawmakers on Feb. 10 that Greece was set to miss deficit goals, suggesting that the measures may fall short.

Erik F. Nielsen, UniCredit’s chief global economist, said in a note yesterday that he keeps hearing investors say a Greek exit from the euro would be “better for all parties.”

“I am very confident that a Greek exit would be a disaster for Greek society,” Nielsen said. “For the rest of Europe I don’t think it’ll matter much (if at all) in the longer term, but I fear that a lot of people may be underestimating the short term risks to Europe of a Greek collapse.”

Arson Attacks

Ten buildings were set ablaze in central Athens by anti- austerity protesters including a Starbucks Corp. (SBUX) cafe and a bank, a fire department spokesman said, speaking on the condition of anonymity in line with official policy. The fires were near a bank that was set on fire in May 2010, killing three employees during a general strike against Greece’s first bailout package.

Demonstrators tore up marble in front of parliament that they hurled with fire-bombs at police guarding the chamber. Officers in riot gear responded with tear-gas and flash grenades. Fifty officers were injured in the violence, police spokesman Takis Papapetropoulos said by telephone. The Greek Health Ministry said in an e-mailed statement that 70 people had been taken to local hospitals. Police said 45 rioters had been arrested.

“Vandalism, violence and repression have no place in democracy and won’t be tolerated,” Papademos told lawmakers before the vote. “In such critical times we have no luxuries for such conflict.”

The measures equal about 7 percent of gross domestic product over three years and include a debt swap that would shave 100 billion euros off more than 200 billion euros of privately held debt.

Greece was granted its first aid package of 110 billion euros in May 2010.

To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net; Natalie Weeks in Athens at nweeks2@bloomberg.net; Marcus Bensasson in Athens at mbensasson@bloomberg.net.

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net