Greek austerity budget passes second vote amid protests

Athens, Greece (CNN) -- Greece's Parliament has approved a key law needed to implement a five-year austerity package that was approved by lawmakers a day earlier.

Lawmakers voted 155-136 in favor of the measure, with five voting "present" in the 300-seat house.

The package had been demanded by international lenders -- and its passage should clear the way for an emergency loan to Athens.

But Greece has seen weeks of sometimes violent public protests against the austerity plan, which follows a series of cuts agreed to last year.

European Commission head Jose Barroso and European Union President Herman van Rompuy said they strongly welcomed Thursday's vote.

"This was the second, decisive step Greece needed to take in order to return to a sustainable path," they said in a joint statement from Brussels. "In very difficult circumstances, it was another act of national responsibility."

They said the conditions "are now in place" for a decision on the release of a fifth round of emergency funds to Greece, part of a multi-billion euro deal agreed last year, and for "rapid progress" on a second proposed bailout.

Following the vote, the Greek civil servants' union ADEDY called another rally outside Parliament for Thursday evening.

Before Wednesday's vote, small numbers of demonstrators hurled stones at police, chanted, waved Greek flags and set small fires to protest the austerity measures, which include new taxes and job cuts.

At least 19 police officers were injured Wednesday, police said.

European and international lenders agreed last year to give Greece a $156 billion bailout package as its deficit soared, but were threatening to hold up an installment of $17 billion due soon.

Greece has debt payments coming due in mid-July and needs the $17 billion in emergency funds to be able to pay them -- but lenders, including the International Monetary Fund and the EU, had demanded that it approve the austerity measures in order to get the loan.

A default by Greece would send shock waves through the European banking sector and potentially dent global economic confidence.

German Chancellor Angela Merkel called Wednesday's passage of the austerity measures "really good news," German government spokesman Steffen Seibert said on Twitter.

Eurogroup chairman Jean-Claude Juncker also welcomed the news, saying: "I'm very happy and relieved that the Greek Parliament followed the government and voted in favour of a new program of structural reforms and budgetary adjustment."

Unions oppose the austerity package, but its backers say it is essential to the stability of the Greek economy, the euro, and the global financial system.

Protesters lament that the cuts are being carried out on the backs of those who can afford it least.

CNN's Elinda Labropoulou, Diana Magnay, Frederik Pleitgen and Eve Parish contributed to this report.

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Greek austerity squeaks through, but budget woes remain (The Christian Science Monitor)

Paris – Greek lawmakers under terrific urging from European Union officials today voted 155 to 148 to accept a package of austerity necessary to avert a government default and avoid a feared chain reaction of market turmoil around Europe and the world.

Markets were optimistic before today’s vote that Greek politicians would ignore a howling public that polls as high as 80 percent opposed to the $40 billion in government spending cuts and tax hikes that are the price of the international bailout that's staving off default. Other struggling “peripheral” euro-zone members, including Ireland, Portugal, Spain and Italy, are anxious not to suffer the negative market consequences of a Greek default.

The current Greek crisis, the second in slightly more than a year, is seen by some as a possible harbinger of European disunity, a turning point for greater isolation between the 17 eurozone members. Others see it as a necessary spur towards deeper integration.

Prime Minister George Papandreou framed today’s vote in historic terms and together with new finance minister Evangelos Venizelos, a heavyweight in the ruling Pasok party, pushed through the package and also avoided defections that could have brought the government down.

IN PICTURES: Greece protests

News reports have a Pasok party headquarters in Crete being burned down, and in Athens the outcome of the vote has brought enough tear gas on the street to put 30 people in the hospital. The nation is in the second day of general strikes called by the trade unions. In the past weeks, atmosphere for the mostly peaceful protests in Syntagma Square, epicenter of political anger, has turned violent.

Tomorrow brings another vote in Parliament to enable the austerity legislation. That vote is being treated as pro forma, though some of the specific details – for instance, a huge cut in utility spending – remain sensitive.

Show Greece the moneyToday’s vote, if ratified tomorrow, allows the release of a of $16.5 billion slice from the $142 billion bailout agreed in May 2010, after the Papandreou government admitted its books had been cooked to hide a $350 billion deficit. [Editor's note: This story was edited after posting to correct the size of the bailout package.]

Lacking a growth package and any structural adjustments, many Greek citizens say that agreeing to an austerity package merely sentences them to an unrelenting long-term debt problem that they can’t see a way out of.

“I’m not sure what will happen now. What I see is a lot of political and social polarization in Greece,” says Takis Pappas, an expert on Greek politics at the University of Strasbourg, “and this is what worries me at the moment. Greece doesn’t have room to maneuver. Will the opposition try to take down the government or be silent. The opposition [New Democrats] will likely play hardball.”

'Kicking the can'The fresh $16.5 billion, however, will only sustain the Greek payroll through the summer, causing some analysts to say today’s vote merely “kicks the can down the road.”

Yet analysts at Morgan Stanley, speaking anonymously, say that the new money and time bought by a€?kicking the cana€

Philippe Waechter, chief economist at Natixis Asset Management in Paris, says the vote may be salutary but still doesn’t offer a long term answer.

“Thanks to this vote we can avoid the problematic situation that would arise from Greece's straight default,” Mr. Waechter argues, “but this vote, on a very, very drastic austerity plan, only allows for Greece to benefit from the Troika's [EU, IMF, European Central Bank] next financing tranche. What is preoccupying is that a considerable effort is made to just meet a short-term deadline. What will happen tomorrow if Greece is again in the same situation, which will surely occur if nothing is done to tackle long-term problems?”

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Greece Passes Austerity Bill -- Now Comes the Hard Part (Time.com)

Vasso Sarafidou wasn't carrying a gas mask when she walked from her home near the Acropolis to the anti-austerity demonstration outside parliament in Athens on Wednesday. Passing rows of riot police, some not much older than her teenage grandchildren, Sarafidou, 72, said she knew Greek lawmakers were going to pass the bill that would raise taxes and sell some state assets in exchange for more bailout loans. But she thought the bill was a bad idea, and she joined the protest against it.

The tear gas hit her not long before the bill passed with a final vote of 155-138, as police held back angry protesters trying to storm parliament. A young woman sprayed Sarafidou's face with liquid Maalox, the stomach antacid, to keep her eyes from burning. "I suppose this means they want me to go home," she said, shielding her eyes with large sunglasses. "Well, I'm not going."

Wednesday's vote may have eased, at least for now, the worries of European Union leaders in Brussels and the fragile government of Greek Prime Minister George Papandreou - but Greeks remain stubbornly opposed to the implementation of austerity policies in exchange for bailout loans. Greece was set to run out of cash next month without the latest installment of some $17 billion of loans from the EU and the International Monetary Fund (IMF). The EU and the IMF said that the new austerity plan had to pass for Greece to get the cash infusion. Athens is bracing for more demonstrations on Thursday, when parliament takes up a vote on how to implement the new austerity measures. (See photos of the protesters in Athens.)

Though leaders in Brussels greeted Wednesday's vote with relief - European Parliament President Jerzy Buzek praised it as "a turning point for Greece and the euro zone" - big challenges remain. Privately, many economists say Greece's default is inevitable, since its debt is rising and its antiquated, almost Soviet-style economy has few sources of growth. If Greece defaults, Europeans fear that the debt crisis will spread to other indebted countries such as Ireland and Portugal, who are also seeking bailouts, and vulnerable economies such as Spain and Italy.

"The vote itself - albeit important for dealing with pressing issues like the Greek government running out of cash - is less critical than the long-term response," says Fredrik Erixon, director of the European Centre for International Political Economy, a Brussels-based think tank. "Everyone understands Greece will have to default, and until we work out how to do this, there will be new crises erupting time and time again."

The challenge for Papandreou's government is even more immense. It must implement the unpopular austerity package while also convincing an angry Greek public that this is the right way to dig the country out of more than $450 billion in debt. At the same time, it must deal with the worst recession since the 1970s. Unemployment is at more than 16%, and is almost three times that rate for young Greeks. "Greek society may have reached a breaking point," says Ian Lesser, a Senior Transatlantic Fellow at the German Marshall Fund. (See photos of clashes between protesters and police.)

Polls show that Greeks are skeptical that more public-spending cuts and tax hikes will solve the debt problem, since the country's public debt is forecast, in the most optimistic scenario, to rise to about 140% of GDP by 2015. But Dimitris Katsikas, a research fellow with the Hellenic Institute of European and Foreign Policy in Athens, says the government could still win people over if it tackles tough reforms, such as reducing Greece's bloated public sector - and shows results. Such results could also move skeptical Europeans, Katsikas says, who are currently discussing a second bailout for Greece that could total $150 billion.

"If the Europeans move quickly and a second bailout is agreed, then I think we'll see tension recede over the next couple of months," Katsikas says. "If the [Greek] government fulfills its tasks, then this calm might last a little longer as its own MPs will be able to respond to angry constituents by pointing to achievements."

Unless it wins over hearts and minds - and does it soon - Papandreou's government could fall if deputies in the ruling Socialist PASOK party defect. That means snap elections before 2013, when PASOK's term ends. But even then, Greece would likely end up with a coalition government, since the public also has little faith in the center-right New Democracy party, the main opposition. Smaller parties, such as the Communist Party of Greece and the right-wing Popular Orthodox Rally, have also picked up little new support from Greeks, who dismiss most politicians as thieves. Yiota Valaoura, a 52-year-old worker at a weapons factory, says the Greek Orthodox Church would do a better job legislating than those in parliament. "We don't take anyone in that building seriously," says Valaoura, who drove three hours from her home in Aegion, a city in the Peloponnese, to get to Wednesday's demonstration outside parliament. (See how the U.S. can avoid its own Greek tragedy.)

Many of the protesters made their distaste clear by throwing yogurt at lawmakers arriving for the vote. The more militant threw rocks, chunks of marble and petrol bombs at riot police, who responded with volleys of tear gas. The now-familiar stench of burning gas cloaked Syntagma, the square across the street from parliament.

Clashes between police and fringe anarchist and far-left protesters continued into the evening. The Red Cross reported that at least 500 people have been treated for injuries or breathing problems and more than 30 were sent to the hospital. Police also reported that 31 officers were hurt in the days violence. Greek media, meanwhile, reported that the police response around the square was especially brutal. Motorcycle police chased protesters fleeing on foot, and also attacked journalists. Italian photojournalist Gabriele Micalizzi told TIME that he received five stitches after police beat him while he was photographing a fight between an anarchist and a police officer.

Before the day devolved into chaos, Vasso Sarafidou, the grandmother from Athens, had stood her ground near Syntagma for hours. She clapped when protesters chanted slogans equating the government to the 1967–1974 military junta. She frowned when the young riot police edged toward the crowd, their shields raised, and when the kids in black threw rocks at them. "I don't know what else to do but to come out here and let my feelings be known," she said, her eyes watering from another dose of tear gas. "I feel like this country is dying, and I'm afraid that our politicians don't know how to save it. So maybe we have to save it. Someone has to save Greece."

With reporting by Leo Cendrowicz/Brussels and Nick Malkoutzis/Athens

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Greek deputies set to back key austerity bill (AP)

By DEMETRIS NELLAS and CHRISTOPHER TORCHIA, Associated Press Demetris Nellas And Christopher Torchia, Associated Press – 23 mins ago

ATHENS, Greece – Greek deputies are poised to back a deeply unpopular austerity bill Wednesday that is essential for the country to get crucial bailout funds and avoid a devastating default on its debts.

The bill, which aims to slash euro28 billion ($40 billion)from the Greek budget, must be passed by Parliament if international creditors are to release the next euro12 billion ($17 billion) installment of the country's euro110 billion ($157 billion) bailout fund — and prevent a default that could have huge repercussions in Europe's banking sector and stoke renewed turmoil in global markets.

An additional bill that details how the austerity measures will be implemented must also be passed in a vote Thursday.

The proposals by the Greek government have sparked violent protests in Athens as well as a rebellion inside the governing Socialist Party. Prime Minister George Papandreou has struggled to convince his party's deputies to back the bill. He replaced his finance minister earlier this month to assuage the concerns of some lawmakers.

The Socialists hold a five-seat majority in the 300-member legislature.

Hours ahead of the vote, it looks like only one Socialist deputy will fail to heed Papandreou's call to back the measures, suggesting that the bill will get at least the 151 votes needed for it to pass. Hopes that the bill will pass have seen European stock markets start the day off strongly and the euro jump towards $1.44.

Alexandros Athanassiadis, many of whose constituents are employed by the Public Power Corporation which is up for privatization, said he maintains his opposition to the bill.

"I have not changed my opinion ... as things stand, I persist in my decision," he told The Associated Press. "I don't think (any other socialist) deputies will vote against. I will be the only one."

Athanassiadis said he opposes privatization of electricity and water companies, but supports the selling of several other state enterprises.

Wednesday's vote comes against a backdrop of violent demonstrations and on the second day of a nationwide general strike which has brought much of the Greek economy to a standstill.

Protesters have vowed to encircle Parliament to prevent deputies from entering and voting for the bill. A massive security operation was under way to avert the blockade, with a large section of central Athens sealed off to traffic.

Scuffles broke out early in the morning as demonstrators attempted to block a major avenue leading to the center of the city, and to Parliament. Riot police responded with pepper spray, and 10 people were treated in a nearby hospital for minor injuries, hospital officials said.

A day earlier, extensive clashes left at least 46 people injured, most of them police, as rioters pelted police with chunks of marble and ripped up paving stones, and authorities responded with repeated volleys of tear gas and stun grenades.

Greece has said it has funds only until mid-July, after which it will be unable to pay salaries and pensions, or service its debts, without the next bailout installment from the eurozone and the International Monetary Fund. The country is also in talks for additional help in the form of a second bailout, which the prime minister has said will be roughly the size of the first.

"Voting these measures is required to maintain our credibility in the (bailout) process," new Finance Minister Evangelos Venizelos said during the debate Tuesday night. "Voting for these measures, regardless of any reservations, is an important, brave act of political responsibility."

But even prominent Socialists who say they will vote in favor are voicing objections.

"The austerity measures are not only harsh, not only unfair, but they are also ineffective," Socialist critic Vasso Papandreou, who is not related to the prime minister, told parliament late Tuesday. Still, she said she would grudgingly vote for the bill.

"Greece has many problems but the real problem is the eurozone," said Papandreou, a former EU commissioner. "Europe should be a zone of solidarity, but it is a jungle where the banks can do what they like."

____

Menelaos Hadjicostis, Elena Becatoros and Thanassis Stavrakis contributed.

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A Lose-Lose for Greeks Facing Austerity Measures (Time.com)

As the antiausterity demonstration in Athens on Tuesday, June 28, devolved into familiar violent, tear-gas-soaked clashes between fringe anarchists and police outside Parliament, Giorgos Rallis shut off his television and stewed quietly about the immense dilemma facing his country.

On Wednesday, Greek lawmakers are due to vote on an unpopular austerity bill that includes more tax hikes and a controversial plan to privatize state-owned enterprises, including the Public Power Corporation (PPC), where Rallis has worked as a technician for 19 years. European leaders and the International Monetary Fund have already lent Greece €110 billion ($150 billion) and say that unless the government passes the austerity bill, they won't hand over the latest installment of bailout loans, totaling €12 billion ($17 billion). That would leave the country, which runs out of cash in July, to default on its massive sovereign debt. But many Greeks say the year of austerity they have already suffered in exchange for the previous bailout loans has impoverished Greeks and done nothing to help the country pay back its debt. (See photos of the protests in Greece.)

"The world has cornered us, and our own politicians have cornered us," says Rallis, 46, who escaped to the island of Evia, some 40 miles (65 km) away from Athens, to avoid the two-day general strike that shut down much of the country's public transportation, public services and businesses. "The populists in Europe ridicule us as a bunch of lazy people and tell us to sell the Acropolis. I am tired of this country being the easy target. Let Greece go bankrupt. Let all of Europe go bankrupt. I want them to stop bleeding me for money I just don't have."

Rallis is just one member of the quiet but angry majority that has Greek lawmakers nervous, even as world headlines are dominated by the dramatic images of young self-styled anarchists and far-left militants, many donning gas masks and crash helmets, fighting with police and one another. During Tuesday's protests, police fired several rounds of tear gas to disperse rioters and the rest of the crowd. At least 46 people - 37 police officers and nine protesters - were injured on Tuesday, according to Greek authorities. By late evening, the tear gas was still thick in the air around Syntagma, the square across the street from parliament. Fires set by rioters burned in many garbage bins, and bits of marble hacked off from storefronts littered the streets. The protesters who had camped out at Syntagma for weeks strummed guitars and sang songs as angry kids spray-painted revolutionary slogans on the facades of fancy hotels and riot police patrolled the square. More drama was unfolding inside Parliament, as Prime Minister George Papandreou and his new Finance Minister, Evangelos Venizelos, tried to keep Socialist lawmakers from defecting before the crucial vote. At least four deputies from the Socialist PASOK Party have said publicly that they may vote against the new austerity bill. If one more lawmaker votes against it, the bill fails.

Though opposition parties have been largely united against the new austerity measures, Elsa Papadimitrou, a deputy from the main opposition, the center-right New Democracy Party, said she was mulling a vote for the austerity package "to put the good of the nation above party interests," according to the Greek daily Kathimerini.

Meanwhile, the political maelstrom continues to worry leaders in Brussels. Some have discussed alternative options for Greece in case the austerity bill fails in Parliament. But the E.U.'s economic chief, Olli Rehn, shut down that talk. "There is no Plan B to avoid default," he said Tuesday. "The European Union continues to be ready to support Greece. But Europe can only help Greece if Greece helps itself."

Rehn added that Greek political leaders should be "fully aware of the responsibility that lies on their shoulders." But those same politicians also are facing historic levels of distrust from the Greek public, who view the country's political system as hopelessly corrupt and broken.

Papandreou's government - which has borne the brunt of the antiausterity backlash - is fragile, even after a Cabinet reshuffle last week that was meant to rally Socialist deputies who had lost faith in his Ministers. The reshuffle brought on board new Finance Minister Venizelos, a steely constitutional-law scholar who has a strong following in PASOK, but analysts say the move may only buy the party a little more time. (See why Greeks living in urban areas are going back to their ancestral villages.)

Pollsters and analysts predict that if the vote fails on Wednesday, the government will collapse quickly. But even if the new austerity bill passes, snap elections look increasingly likely. And even if there are new elections, it's unclear just who would lead the country, since polls show that Greeks also have little faith in the New Democracy Party and its leader, Antonis Samaras.

According to Christoforos Vernardakis, the president of leading polling agency VPRC and a political-science professor at the Aristotle University of Thessaloniki, the economic crisis is bringing to light a long-simmering political crisis in Greece. Since the mid-1990s, when political scandals became commonplace, "more and more people have suspected their politicians are involved in a network of unlawful and corrupt practices," Vernardakis says. "Now people are demanding from their representatives ethics, more efficiency in dealing with problems and a vision for the future. I doubt that these politicians of today can fulfill these demands."

But the prospect of bankruptcy, laden with political chaos, unnerves many Greeks, including Kostas Ifantis, a political-science professor at the University of Athens. He and others fear that the political polarization in Greece today could foment social unrest that in turn could upend the country and even the euro zone. "I hope cooler heads prevail and people sit down and work out what's best for all of us," Ifantis says. "This is not the time for posturing. When you stare at the abyss, you find your consciousness. That's my only hope."

But Giorgos Rallis says he lost hope a long time ago. His wages have been cut; his tax bill has gone up. He worries that he won't be able to pay his rent and support his wife and two young sons if he has to pay for more austerity measures. And he also worries that he will lose his job if the power company PPC is partially privatized.

"I am personalizing this, but why shouldn't I?" he says. "I feel austerity every single day. I see people losing their jobs and homes, eating at soup kitchens, losing their pride. Let the country go broke. I've already gone broke."

- With reporting by Leo Cendrowicz / Brussels and Nikolas Leontopoulos / Athens

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Greece set for austerity package vote

A fire burns as protesters clash with police over new planned austerity measures in Athens, Greece, on Tuesday.Protesters vow to take to the streets again Parliament plans to vote on the austerity package on WednesdayAll three unions that took to the streets Tuesday plan rallies Wednesday

Athens, Greece (CNN) -- Greek unions plan to rally again Wednesday, a day after riot police fired tear gas to disperse thousands of stone-throwing demonstrators who protested austerity measures.

All three unions that took to the streets Tuesday plan to rally for a second straight day. The protests injured 21 police officers and one demonstrator.

Protesters are rallying outside the Greek Parliament in the capital, where lawmakers are set to vote Wednesday on a five-year package of tax increases and spending cuts.

The newly appointed head of the International Monetary Fund, Christine Lagarde, appealed to the Greek opposition to overcome their political differences and join a national consensus on the reforms.

The 48-hour general strike kicked off early Tuesday, hobbling most of Greece's transportation systems but freeing workers to participate in demonstrations.

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Transportation disruptions took place on land, on sea and in the air.

Air traffic controllers periodically stopped work and flight traffic, according to their union. Stoppages also disrupted sea travel in the maritime nation, which encompasses many islands.

Greece must pass the austerity measures if it is to win the last $17 billion portion of a $156 billion bailout package from other European nations that was granted in 2010 -- and also to clear the way for an additional potential bailout package to keep Greece afloat going forward.

Greece needs the bailout funds to avert a default on debt repayments that are due as soon as mid-July.

A default would send shock waves through the European banking sector and potentially dent global economic confidence.

Greece faces "a critical juncture," said Olli Rehn, a European Union commissioner and the bloc's lead negotiator on the bailout. He urged parliament to pass the austerity measures.

"Both the future of the country and financial stability in Europe are at stake," Rehn said in Brussels. "I trust that the Greek political leaders are fully aware of the responsibility that lies on their shoulders to avoid default."

He warned that there was "no Plan B" to avert default, and said economic reforms -- although challenging -- were a better alternative for the Greek people.

Protesters lament that the cuts are being carried out on the backs of those who can afford it least.

CNN's Elinda Labropoulou and Diana Magnay contributed to this report.

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As Austerity Anger Swells, Greece's Government Struggles (Time.com)

Updates Appended: June 16, 2011

Even after the scuffles between police and anarchists erupted into clouds of tear gas on June 15, Giorgos Liolios did not leave Syntagma Square. For more than a year, Liolis, a 37-year old Athenian struggling to keep his small bakery afloat, was part of the silent majority that gave Prime Minister George Papandreou the benefit of the doubt. But after a year of austerity left him nearly broke, his brother unemployed and the debt-ridden country no better off, he drove to Athens from his suburb to stand alongside thousands of angry Greeks who, for weeks, had transformed Syntagma into a mini-Tahrir Square, complete with drum circles, tents and Cretan rebel songs.

"Everyone in that building should be ashamed," he says, pointing to the parliament building, which is now surrounded by protesters waving banners depicting Papandreou as Judas and a donkey. "They want us to sacrifice, but we need to see why we're sacrificing. As Greeks, we just want to live with enough money to get by, to have a little dignity. We can't do that anymore. We can't take it anymore. Why can't George Papandreou understand that?" (See pictures of economy-driven riots in Greece.)

It's now clear that Papandreou got the message. On Thursday, which also happened to be the American-born Premier's 59th birthday, he presided over an emergency meeting of the parliamentary group of his ruling party, PASOK, which he leads and his father, Andreas, founded, after two deputies defected and a day after state-run NET TV reported that he had considered resigning. But afterwards, in a televised speech to PASOK deputies, Papandreou vowed to stay in office and work to lead Greece out of its debt crisis.

"We do not have the luxury to run away" from our responsibilities, he said, to applause from the PASOK deputies. "I have to fight, all of us here have to fight."

It was a show of party unity after a fractious Wednesday, when Papandreou huddled with advisors and talked to Antonis Samaras, leader of the main opposition party New Democracy, about forming a coalition government that would pursue austerity policy together. In a short televised speech Wednesday night, he said he would form a new cabinet and ask parliament for a vote of no-confidence. Samaras responded with his own televised speech and said that the country and markets no longer had faith in the Socialists.

Pressure on Papandreou has been building for weeks. On June 13 Standard & Poor's downgraded Greece's credit rating, handing it the lowest rating in the world and noting the country is "increasingly likely" to face debt restructuring. With his poll ratings in free fall and his own deputies defecting from the Party, Papandreou seems to be running out of options. Some analysts wondered if he would even last the day as Premier. (See more on Greece's debt crisis.)

"This government is almost dead," says Kostas Ifantis, a political science professor at the University of Athens. "I cannot see how they can push forward with the very, very painful measures the country needs. It was hard ten months ago, but it's even harder now."

There's little indication that a new government will pave the way to stability - even if new cabinet consists of fresh faces rather than longtime Greek politicians, whom most Greeks view as hopelessly corrupt and insular. "Markets are not going to respond well to this political turbulence," says Theodore Pelagidis, a professor of economic analysis at the University of Piraeus. "Right now, what is seriously lacking in this country is political leadership, and neither major party can offer it. There is no way out of this crisis without a healthy political system, which this country does not have." (See how one year after the bailout, Greece is still hurting.)

Papandreou's new resolve means snap elections will be put off - for now. If his government continues to struggle, elections may be the only option down the road, analysts say. "In addition to an economic crisis in Greece, we now have a legitimacy crisis," says law professor Aristides Hatzis, who runs www.greekcrisis.net, a blog that diligently charts every twist and turn of the debt crisis. "George Papandreou was elected on a mandate of expanding government and he has had to shrink it. People are demonstrating every day outside parliament, and some people are even attacking parliament. Elections are the only way to regain legitimacy."

But even if elections take place, the country still faces a leadership vacuum. Support for both PASOK and New Democracy have reached new lows, which suggests neither party would have a majority in early elections. Defectors from those groups have joined smaller parties, such as the sclerotic Communist Party of Greece (KKE) and the nationalist, often incendiary Popular Orthodox Rally (LAOS), diluting the power of the main parties even more. (See how Greek voters gave the austerity plan a second chance.)

Back in Syntagma Square, Giorgos Liolios shakes his head as young demonstrators throw rocks at riot police, who respond with still more tear gas. He smeared his face with liquid Maalox earlier in the morning to close his pores, but that doesn't stop his eyes from stinging. Through all the haze and turmoil, it's difficult for him to see any clear champion for the millions of Greeks struggling to get by. Business at his small bakery is down 50 percent from last year. His taxes have gone up. Even the spaghetti he buys at the supermarket has doubled in price. "I'm not an anarchist, I'm not a fascist, I'm not a punk," he says, wiping his face. "I'm a Greek. Just a regular person trying to have a regular life. I'm willing to make sacrifices for my country, but not if it leaves me for dead."

The original version of this story has been updated to reflect new developments.

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Greeks strike, clash with police over austerity (Reuters)

ATHENS (Reuters) – Stone-throwing Greeks clashed with police and tens of thousands of protesters marched on parliament on Wednesday to oppose government efforts to pass new austerity measures for the debt-stricken euro zone state.

Unions representing half the five-million-strong workforce also launched a nationwide strike, shutting ports, schools and other basic services in the Mediterranean state.

Prime Minister George Papandreou must push through a new five-year campaign of tax hikes, spending cuts and sell-offs of state property to continue receiving aid from the European Union and International Monetary Fund and avoid default.

He not only faces public protests and resistance from a conservative opposition that has surpassed his Socialist party in opinion polls, but a few backbenchers in his own parliamentary grouping are also threatening to reject the plan.

Political analysts said he would be able to push through the package with support from his PASOK party and possibly a handful of opposition deputies, but that protests had introduced some uncertainty. One PASOK deputy defected on Tuesday, reducing the party's number of seats in parliament to 155 out of 300.

Thousands of activists and unionists converged on the central Syntagma square on the parliament's front steps to try to stop lawmakers from entering to debate the bill they hope to pass by the end of the month.

"Thieves, traitors!" many chanted. "Where did the money go?"

"These measures are not taking us anywhere. They only lead to unemployment, hunger and poverty," said Panayotis Dounis a 60-year-old pensioner. "We wouldn't be here if the politicians had made sacrifices as well. We are absolutely disappointed."

About 1,500 police closed a large part of the city center and erected two-meter metal barricades in front of the assembly, creating a corridor to hold back protesters as lawmakers drove up to the building in official limousines.

Riot police fired several rounds of tear gas at dozens of masked youths who pelted them with rocks and a few petrol bombs. Several activists also hurled oranges at Papandreou's car as he drove past, a police official said.

Several groups in the protest clashed between themselves. Police said one person was injured and they detained 40 people.

"CRUEL AS A TIGER"

The new austerity package foresees 6.5 billion euros ($9.4 billion) in tax hikes and spending cuts this year, doubling measures agreed with bailout lenders that have pushed unemployment to a record 16.2 percent and extended a deep recession into its third year.

The plan includes: new luxury taxes; a crackdown on tax evasion; tax hikes on soft-drinks, swimming pools, restaurant bills and real estate; and cutting the Mediterranean state's 750,000-strong public work force by a fifth.

With those and other measures worth total savings of 28 billion euros through 2015, it also aims to raise 50 billion euros by selling off state-owned firms.

Papandreou appealed for national consensus on the laws, on which hang the EU and IMF release of a further 12 billion euros in aid next month that Athens needs to pay off maturing debt or face default.

"We are at a historically crucial moment ... and I believe that national consensus is important for the country's interest," Papandreou told President Karolos Papoulias during a meeting. "We will proceed with the responsibility for the necessary decisions to see the country exit the crisis."

Papandreou was planning to talk to party leaders later on Wednesday and then make a statement, a government official said.

On Tuesday, euro zone finance ministers failed to reach agreement on how private holders of Greek debt should share the cost of a new bailout for Athens worth an estimated 120 billion euros before a June 23-24 summit.

The European Central Bank opposes such a move, saying that if such participation is involuntary it could be deemed default that could shock markets and put weaker euro states at risk.

The lack of agreement pushed the cost of insuring Greek debt against default to a new record high on Wednesday, while shares in Greek banks fell 7 percent on fears of political uncertainty.

The PASOK deputy who defected said he could not back the package. "You have to be as cruel as a tiger to vote for these measures. I am not," George Lianis said in a letter to Parliament Speaker Filippos Petsalnikos on Tuesday.

Another PASOK member said he would vote against it. But analysts said the party, which still holds a majority, would pass the package by the end of the month before working on another set of laws on how to implement it.

"My gut feeling is that at the end of the day they will get enough MPs... I'd say there is a 70 percent chance that it will go through," said Diego Iscaro, IHS Global Insight.

"The other option (voting it down) would be quite destabilizing. That will drive MPs to vote for it."

The cabinet is also expected to survive the turmoil in the short term. A poll on Sunday showed 62 percent of Greeks expect the government to call early elections before its term ends in 2013, although 59 percent thought they did not need a vote now.

(Additional reporting by Yannis Behrakis, Ingrid Melander, Harry Papachristou and Yiorgos Karahalis; Writing by Michael Winfrey; editing by Mark Heinrich and Elizabeth Piper)

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Greek PM rebuffs austerity opponents, vows June vote (Reuters)

ATHENS (Reuters) – The Greek government defended its new austerity package from attacks in parliament on Friday, saying it was the only way to stave off bankruptcy, and made a new call for opposition parties to back the plan.

Prime Minister George Papandreou's plan almost doubles the belt-tightening measures for 2011 already agreed with the International Monetary Fund and the European Union, after the lenders judged that Athens had missed goals outlined under its bailout.

The ruling Socialist party has 156 deputies in the 300-seat house but growing numbers of its members are expressing unease at proposals including cutting spending and raising taxes to reduce the deficit by 6.5 billion euros more this year than first planned.

Papandreou is anxious to pass the plan for more austerity through 2015 despite strikes, mass street protests and dissident voices within his own ruling Socialist party.

"The medicine is not pleasant and the treatment requires devotion and commitment," he told parliament.

"No prime minister of any country wants to go out with a beggar's tray and collect money from other countries ... I certainly don't, but I do it for Greece."

Papandreou is fighting to get not only opposition parties but also his reluctant PASOK party behind the strategy, a condition for receiving more aid from international lenders who threw Greece a 110 billion euro ($160 billion) emergency funding lifeline last year.

PROTESTS AT PARLIAMENT

According to a weekly schedule released by parliament, lawmakers will start debating the midterm plan in the chamber's economic affairs committee on Wednesday.

That will coincide with a nationwide strike by labor unions expected to draw tens of thousands of demonstrators to Syntagma square, parliament's front stoop and the site of two weeks of nightly grassroots protests.

The square is also the convergence point of daily marches by staff in firms earmarked for privatization who oppose the government's pledge to raise 50 billion euros in the selloff of state-owned companies by 2015.

In a televised address to the nation, Papandreou invited proposals for the plan from opposition parties and called for cooperation to improve Athens' position in talks with Brussels ahead of a June 23-24 EU summit.

"I call on the leadership of all parties to cooperate," he said in a televised announcement. "There are many and important points where we converge. With a national consensus, we can negotiate jointly with our partners."

In a move aimed at reducing resistance by the main opposition New Democracy party to the measures, Finance Minister George Papaconstantinou said the government was considering submitting a new tax bill in September cutting VAT and corporate taxes and said he hoped parliament would approve the mid-term plan by the end of June.

The IMF and EU have demanded wider political consensus in Greece before they give the debt-ridden euro zone member more cash. But the main opposition groups have vowed to vote against the new measures, saying they are choking economic growth.

"The mid-term plan is unreliable, unjust and ineffective. It is a de facto confession of the failure of the bailout," New Democracy party spokesman Yannis Michelakis said in a statement.

European officials are still trying to work out a plan which hits private investors for some of the cost of the new funding plan, expected to be worth around an additional 120 billion euros including 30 billion from sales of Greek state assets.

Figures on Thursday showed the economy is in worse shape than initially feared, with gross domestic product tumbling 5.5 percent year-on-year in the first quarter.

(Additional reporting by Angeliki Koutantou; Writing by Dina Kyriakidou and Mike Winfrey; Editing by Hugh Lawson)

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Greeks get details of painful austerity drive (AP)

ATHENS, Greece – Greece's finance minister is to outline details of a new round of painful austerity measures, a day after the country's Cabinet approved the plans and submitted them to Parliament.

Greece has been slipping on reform targets of its euro110 billion ($160.75 billion) international bailout, and the new austerity drive is essential for the debt-ridden country to continue receiving rescue loans.

Plans to be detailed Friday include tax hikes and spending cuts, including extra income, fuel, property and car taxes. Civil servants and pensioners will suffer more income cuts, while health, education, defense and social spending will be further curtailed.

They include euro6.4 billion in remedial austerity this year, a euro22 billion package for 2012-2015 and a euro50 billion privatization program.

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Thousands protest Spain austerity cuts

Protesters set up a camp for the night at a demonstration in Madrid's Puerta del Sol plaza on Tuesday, May 17.Thousands return late Tuesday to Madrid's central Puerta del Sol plazaA few hundred demonstrators camp out overnightDemonstrators are protesting Spain's 21 % unemployment rate

Madrid, Spain (CNN) -- Protests against Spain's economic crisis took a new turn Wednesday as social media networks fueled calls for demonstrators to take to the streets before local elections a few days away.

Thousands returned late Tuesday to Madrid's central Puerta del Sol plaza -- where the main protests began Sunday.

A few hundred demonstrators camped out there overnight, while similar but smaller protests were held in Barcelona and other Spanish cities, a protest organizer said.

"The economy and unemployment are key to the protest because that binds all of us together," said Jon Aguirre Such, a spokesman for the Real Democracy Now, one of many groups convening the demonstrations.

"In this crisis, while some have gotten rich, most people have less income," Aguirre said.

Demostrators are protesting Spain's 21 % unemployment rate and a record 4.9 million jobless.

Protesters say a plethora of temporary labor contracts offer few or no job benefits. In addition, some are protesting against the political and financial establishment that they say is to blame.

The protests come in the closing days of the campaign for local elections set for Sunday. Spain's 8,000 cities and towns will elect mayors, along with 13 (out of 17) regional presidents and parliaments.

Opinion polls in Spanish media predict major gains for the opposition conservatives over Prime Minister Jose Luis Rodriguez Zapatero's ruling Socialist party.

Zapatero, squeezed by the nation's prolonged economic crisis, announced last month he won't seek a third term in national elections due by March 2012.

For the past few years, as Spain's rate of unemployment remained tenaciously high, most of the protests were organized by major trade unions.

But the latest protests appear to be grass-roots movements fueled by social networks, sparking more attention.

Elena Ortega, who says she's managed to find only a part-time secretarial job, helped spread the word on Facebook about the protests on Wednesday.

"If this is happening, it's because the unions weren't doing what was needed, when it was needed. They haven't delivered," she said.

She said she's worried about her 20-year-old son, who has only found temporary jobs in the past four years.

"Forty percent of our young people are unemployed and don't have a chance," Ortega said.

The movement does not appear to be linked to the unions or political parties, the traditional protest heavyweights in Spain, said Economist Fernando Fernandez of the IE Business School in Madrid.

"I think we really don't know what we're seeing," Fernandez said.

"This is the very beginning of a new movement. I don't expect it to become a very large social response or protest against the unemployment perspective in Spain."

But hours later, on Tuesday night, several thousand protesters returned to Madrid's central plaza. By Wednesday morning, dozens remained in their overnight encampment.

The social media networks call for renewed protests on Wednesday evening in Madrid and three dozen other Spanish cities. The aim is to continue the protests at least through the elections on Sunday, Aguirre said.

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