Page last updated at 19:58 GMT, Thursday, 6 May 2010 20:58 UK

Greek parliament votes in favour of austerity measures


British academic Dr William Mallinson on why he joined Greek demonstrations

Greece's parliament has approved the hefty cuts and reforms proposed by the government to address the country's financial crisis.

Members voted 172-121 to pass the bill, which includes tax rises and cuts in pensions and public sector bonuses.

Police used tear gas to disperse protesters who rallied outside.

On Wednesday, three bank workers died in a petrol bomb attack as demonstrations over the planned austerity measures turned violent.

Duncan Kennedy
Duncan Kennedy, BBC News, Athens

It has been volatile and tense in front of the parliament building.

The situation turned a bit ugly with the police wading into the crowd and firing tear gas and loud stun grenades.

Some in the crowd responded by throwing missiles, but not the fire bombs we saw yesterday.

It's not the same scale as last night - protesters simply don't have the numbers or apparent organisation.

The deaths have shocked many in Greece. Bank workers have gone on strike in anger at the loss of their colleagues. Speaking in parliament ahead of the vote, Prime Minister George Papandreou said violence was "not a solution".

"The future of Greece is at stake," he said. "The economy, democracy and social cohesion are being put to the test."

He expelled three Socialist deputies from his parliamentary team for abstaining in the vote.

In New York, the Dow Jones industrial index plunged almost 1,000 points as investors succumbed to fears that Greece's debt problems would halt the global economic recovery.

'Avoid bankruptcy'

Greek Finance Minister George Papaconstantinou has warned Greece is two weeks away from defaulting on part of its debt; bonds worth 8.5bn euros ($12bn; £7.2bn) fall due on 19 May.

Protesters keep up pressure outside parliament

"We have done what was necessary, not what was easy," Mr Papaconstantinou said after the vote. "Without these measures, we'd be thrown into the deepest recession this country has ever known."

He warned that the only way for the country to avoid bankruptcy was to take a 110bn euro bail-out from 15 European countries and the International Monetary Fund, contingent on the three-year austerity programme.

Those measures will mean a freeze on public sector pay until 2014, the average retirement age will rise by two years, and VAT will go up from 19% to 23%.

The aim is to achieve fresh budget cuts of 30bn euros over three years, with the goal of cutting Greece's public deficit to less than 3% of GDP by 2014. It currently stands at 13.6%.

Public sector pay frozen until 2014
Public sector salary bonuses - equivalent to two months' extra pay - scrapped or capped
Public sector allowances cut by 20%
State pensions frozen or cut; contribution period up from 37 to 40 years
Average retirement age up from 61 to 63; early retirement restricted
VAT increased from 19% to 23%
Taxes on fuel, alcohol and tobacco up 10%
One-off tax on profits, plus new gambling, property and green taxes

But Greece's conservative opposition leader has critised the austerity measures as being too harsh.

"The dose of the medicine you are administering is in danger of killing the patient," Antonis Samaras was quoted as saying by AFP news agency.

'Fair demands'

Minor skirmishes broke out in Athens following the vote, as police moved to disperse a few thousand demonstrators who had gathered outside parliament.

But the violence was quickly contained with riot police firing tear gas at the protesters, who had earlier thrown stones and bottles at them.

Wednesday's deaths - the first such fatalities in protests in nearly 20 years in Greece - have shocked many people in Greece.

The Marfin bank branch where the two women - one pregnant - and a man died has become the focus for grieving, with a steady stream of flowers being placed at the front door by people paying their respects, the BBC's Duncan Kennedy in Athens reports.

What went wrong in Greece?

An old drachma note and a euro note
Greece's economic reforms that led to it abandoning the drachma as its currency in favour of the euro in 2002 made it easier for the country to borrow money.
The opening ceremony at the Athens Olympics
Greece went on a debt-funded spending spree, including high-profile projects such as the 2004 Athens Olympics, which went well over budget.
A defunct restaurant for sale in central Athens
It was hit by the downturn, which meant it had to spend more on benefits and received less in taxes. There were also doubts about the accuracy of its economic statistics.
A man with a bag of coins walks past the headquarters of the Bank of Greece
Greece's economic problems meant lenders started charging higher interest rates to lend it money and widespread tax evasion also hit the government's coffers.
Workers in a rally led by the PAME union in Athens on 22 April 2010
There have been demonstrations against the government's austerity measures to deal with its 300bn euro (267bn) debt, such as cuts to public sector pay.
Greek Prime Minister George Papandreou at an EU summit in Brussels on 26 March 2010
Now the government is having to access a 110bn euro (95bn; $146.2bn) bail-out package from the European Union and International Monetary Fund.
Greece's problems have made investors nervous, which has made it more expensive for other European countries such as Portugal to borrow money.
Greece's problems have made investors nervous, which has made it more expensive for other European countries such as Portugal to borrow money.
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Shops and businesses have been clearing up after the riots. Many are boarded up, others are burnt out shells, he adds.

Bank workers took to the streets on Thursday to demonstrate their outrage at the deaths.

President Karolos Papoulias has warned Greece is on the "brink of the abyss".

"We are all responsible so that it does not take the step into the void," he said in a statement.

However, unions have been undeterred by Wednesday's events, urging members to continue demonstrating.

The GSEE private sector union condemned the "fires, blind violence, vandalism", but added: "We are determined to pursue and extend our struggle to meet our fair demands."

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