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Papandreou Prevails in Greek Austerity Vote as One Dies

October 21, 2011

(Updates with clean-up, latest strikes starting in second paragraph. For more on Europe’s debt crisis, see EXT4 <GO>.)

Oct. 21 (Bloomberg) -- Greek Prime Minister George Papandreou won a parliamentary vote on a new round of austerity designed to secure more financial aid, risking further unrest that left one person dead after protests turned violent.

Athens was left to clean up today after protestors clashed with police during a 48-hour strike in the run-up to the vote late yesterday. Papandreou secured the backing of a majority of lawmakers in the 300-seat chamber for the bill as European leaders announced a second summit for Oct. 26 to give them more time to work on a “global and ambitious” strategy to combat the sovereign debt crisis that is roiling global markets.

“From Greece’s perspective they’ve done everything they need to do,” Marchel Alexandrovich, an economist at Jefferies International in London, said in a Bloomberg Television interview with Francine Lacqua. Greece “will probably get its money in the near term, but longer term obviously lots of question marks remain.”

Strikes flared up again today as workers continued to protest government plans for further job layoffs and wage cuts. Municipal workers called another 24-hour walkout and planned to hold a rally in central Athens, defying government attempts to order garbage collectors back to work.

Tax collectors, Finance Ministry employees and some doctors remain on strike, while Greek seamen called a third 48-hour strike in a move that may cause disruptions to food and medical supplies to Greece’s islands, the Athens News Agency reported.

Running Battles

The parliamentary vote capped a day in which hooded protesters in gas masks fought running battles with riot police firing tear-gas rounds outside the parliament building on the capital’s Syntagma Square. A 53-year-old construction worker died of cardiac arrest after a rock hit him on the head, the government said.

Ringed by a cordon of police, lawmakers debated the second round of austerity measures in four months that are necessary to secure the next tranche of international aid to stave off default and win any reduction in Greece’s debt burden.

The package comprises new tax increases, fresh cuts to pensions and wages and plans to dismiss 30,000 state workers. Drawing particular fire from unions is an aspect of the legislation which suspends the power of unions to impose wages and work rules through collective labor agreements.

Lawmaker Expelled

Greek ruling party lawmaker Louka Katseli, a former labor minister in Papandreou’s government, voted against the article and was subsequently expelled from the party, whittling down Papandreou’s four-seat majority. He won the ballot by 154 votes to 144 against.

The vote “was something more” than an issue of party discipline, Papandreou said in an open letter expelling her from his Pasok party. “It was an issue of national responsibility. For the critical negotiations that we face in the next few days to secure the sixth tranche and ensure the financing of our immediate fiscal needs.”

The urgency was underlined by the latest report by outside assessors on Greece’s finances that recommended paying the next installment of bailout money to Greece “as soon as possible” after the government makes good on its austerity pledges.

While the Greek government has made “important progress,” the country’s debt dynamics remain “worrying,” according to the report by the so-called troika of inspectors from the European Commission, the European Central Bank and International Monetary Fund.

‘No Miracles’

“We must tell Greeks the truth,” Greek Finance Minister Evangelos Venizelos said in a speech to parliament in comments broadcast live. “There are no miracles. The country won’t be saved by some miracle. The miracle will be the result of hard work.”

Outside, police said about 50,000 people marched through central Athens to protest the austerity bill. At one point, group of about 200 hooded youths threw stones and Molotov cocktails at demonstrators from the Communist Party of Greece- backed PAME labor union. People with head wounds were treated at a first-aid station in Syntagma Square.

A crane removed the burnt-out wreck of a ticketing booth from the square today as the clean-up resumed. Tear gas lingered in the air between the parliament and the Grande Bretagne Hotel where many of the clashes took place. The hotel’s marble steps, chipped away and used as projectiles, looked like they had been gnawed by a giant rat.

City Damage

Athens Mayor George Kaminis demanded that the government compensate the capital for damage caused to city property during the strike. He’s still awaiting a response to a previous request for damages caused by riots in June, when the first austerity package was passed, he said in an interview on state-run NET TV.

The IMF is watching the Greek protests closely and “with concern,” spokesman Gerry Rice told reporters in Washington. “We understand that this is a very difficult time for the people of Greece, and times of crisis are always difficult, especially if people perceive that changes that need to be made are unfair.”

Two years after the debt crisis came to light in Greece, Papandreou is courting social unrest that risks boiling over as he pushes the additional austerity through.

Successive rounds of tax increases and cuts to wages and pensions have deepened a recession now in its fourth year, with the Greek economy set to contract 5.5 percent this year and 2.5 percent next, according to the 2012 budget. The unemployment rate reached 16.5 percent in July, data released Oct. 18 by the Hellenic Statistical Authority showed. That’s more than double the 7 percent that month in Germany, the biggest contributor to euro-area bailouts including for Greece.

“The adjustment pressure on the economy from the package is so great that the risk of protests intensifying further are high,” Martin Blum, co-head of asset management at Ithuba Capital in Vienna, said in a statement. “The risk is that the package is mission impossible economically and politically unless the EU makes concessions in addition to reducing the debt burden.”

--With assistance from Eleni Chrepa, Tom Stoukas, Paul Tugwell and Marcus Bensasson in Athens, Francine Lacqua in London and Ian Katz in Washington. Editors: Alan Crawford, Maria Petrakis

To contact the reporters on this story: Maria Petrakis at; Natalie Weeks in Athens at

To contact the editor responsible for this story: Tim Quinson at

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