Leaders of Greece's Ruling Coalition Told Lawmakers to Support the Newest Bailout Bill (Setting Wage, Pension and Job Cuts) or Face Being Dropped from Party Lists for the Next Election

Greece Set to Agree Bailout as Germany Demands Action

February 11, 2012

Reuters - Greek lawmakers looked set to endorse a new and deeply unpopular austerity deal on Sunday to secure a multi-billion-euro bailout and avert what Prime Minister Lucas Papademos warned would be "economic chaos."

After days of dire warnings and threats of rebellion, parliament began debating the bill setting out 3.3 billion euros ($4.35 billion) in wage, pension and job cuts as the price of a 130-billion-euro rescue package from the European Union and International Monetary Fund - Greece's second since 2010.

Greece needs the funds before March 20 to meet debt repayments of 14.5 billion euros.

But the bill has caused turmoil within the ruling coalition and deepened a social crisis among Greeks already hit by a round of cuts and tax hikes to ease the country's huge debt burden.

During the debate a Communist Party deputy hurled the pages of the bill on the floor of the chamber and in fiery exchanges with lawmakers, Finance Minister Evangelos Venizelos warned them:

"If the law is not passed, the country will go bankrupt."

He said the vote in the 300-seat parliament, which began shortly after 2 p.m. (1200 GMT), had to come by midnight "because come Monday morning, banking and financial markets must get the message that Greece can and will survive."

Euro zone paymaster Germany ratcheted up the pressure on Sunday, saying Europe needed action, not words.

Late on Saturday Papademos had warned that failure to back the bill would mean a disorderly default and "set the country on a disastrous adventure."

Greece was nearing "ground zero," he said in an address to the nation .

"It would create conditions of uncontrolled economic chaos and social explosion," Papademos said.

"The country would be drawn into a vortex of recession, instability, unemployment and protracted misery and this would sooner or later lead the country out of the euro," he said.

The EU and IMF say they have had enough of broken promises and that the funds will be released only with the clear commitment of Greek political leaders that they will implement the reforms whoever wins an election potentially in April.

"The promises from Greece aren't enough for us any more," German Finance Minister Wolfgang Schaeuble said in an interview published on Sunday in Welt am Sonntag newspaper.

German opinion polls show a majority of Germans are willing to help, Schaeuble said, "but it's important to say that it cannot be a bottomless pit.

"That's why the Greeks have to finally close that pit. And then we can put something in there. At least people are now starting to realize it won't work with a bottomless pit."

"Greece needs to do its own homework to become competitive - whether that happens in conjunction with a new rescue program or by another route that we actually don't want to take..."

When asked if that other "route" meant Greece would have to leave the euro zone, Schaeuble said:

"That is all in the hands of the Greeks themselves. But even in the event (Greece leaves the euro zone), which almost no one assumes will happen, they will still remain part of Europe."

DEMONSTRATION

About 3,500 police officers braced for a protest due to start around 6 p.m. on the main square in front of the assembly, where black-masked protesters hurled petrol bombs on Friday.

The austerity measures include 300 million euros in pension cuts and a 22 percent reduction in the minimum wage from about 750 euros a month. The bill aims to cut Greece's bloated state sector workforce by about 150,000 people by 2015.

It also provides for a bond swap to ease Greece's debt burden by cutting the real value of private-sector investors' bond holdings by some 70 percent. Greece will miss a February 17 deadline to offer a debt "haircut" to private bondholders if the vote is not passed on Sunday.

Euro zone finance ministers expect Greece to explain by then how 325 million euros from this year's total budget cuts, as yet unspecified, will be achieved before it agrees to the bailout.

Bailout documents released on Friday left blank the amount of the full rescue package, and Venizelos said Greece might need 15 billion euros more to save the country's banks, confirming estimates from EU officials.

With Greece already in its fifth year of recession, labor unions argue the austerity measures are stifling the economy. Unemployment reached a high of 20.9 percent in November last year, with roughly half of young Greeks jobless.

Leaders of the ruling coalition told uneasy lawmakers to support the bill or be dropped from party lists for the next election.

At least 20 deputies from the two main parties in the Papademos coalition threatened on Saturday to vote 'No' - but the bulk of the coalition's 236 MPs are still all but certain to approve the package. Six members of his cabinet have resigned.