Greece bailout: Lucas Papademos warns of default chaos

The BBC's Mark Lowen says that social unrest is on the rise in Greece

Greece faces "uncontrolled economic chaos" if it fails to agree spending cuts and defaults on its debts, Prime Minister Lucas Papademos has warned.

He said ministers who disagreed with austerity measures could not stay in the coalition government, hours after four ministers resigned over the issue.

Greek leaders are trying to enact cuts demanded by the EU and IMF for a 130bn-euro ($170bn; £110bn) bailout.

Unions have begun a 48-hour strike, and protesters clashed with police earlier.

The prime minister said he would do "whatever it takes" to get the deal approved in a parliamentary vote set for Sunday.

"We cannot allow Greece to go bankrupt," he told his cabinet, saying it was an "hour of historic responsibility".

"A disorderly default would plunge our country in a disastrous adventure. It would create conditions of uncontrolled economic chaos and social explosion," he said.

Protest clashes

Earlier, three ministers from the far-right Laos party, a junior partner in the three-party coalition, quit their jobs as deputy ministers.

The party's leader complained that Greeks were being humiliated by Germany, and announced its 15 deputies would not back the austerity measures.

Deputy Foreign Minister Mariliza Xenogiannakopoulou, who quit on Friday afternoon, is the most senior defection so far.

Analysis

It is becoming an all-too-familiar scene in Greece: mass protests in a nation squeezed by austerity, and now horrified by the prospect of yet more to come. Thousands arrived to vent their anger, clashing with police.

But still the Eurozone doubts Greece's commitment. Athens must now find another 325m euros of savings, provide a written pledge to honour the cuts and win parliamentary approval for them. Failure would mean bailout funds are withheld and Greece would go bankrupt next month.

The leader of a small far-right coalition party has withdrawn support for the package. Two Socialist deputy ministers have quit. It is a worrying sign that perhaps the country is reaching breaking point. Economically, politically and socially Greece is sacrificing much to stay in the euro - but at an immeasurable cost.

Her Pasok party, the largest in the coalition, also suffered the loss of a deputy labour minister on Thursday.

But analysts say the cuts package should still have enough support in parliament because Pasok and its other coalition ally New Democracy account for more than 230 deputies out of a total of 300.

Earlier, an estimated 17,000 union members and communists took to the streets in a march at the start of a two-day strike.

Protesters also gathered near the parliament building.

Some demonstrators threw stones and petrol bombs at police, who responded by firing tear gas. A small number of people from both sides suffered minor injuries.

Last night the Greeks presented their plans for austerity cuts to a meeting of eurozone ministers in Brussels.

Their proposals include:

  • 15,000 public-sector job cuts
  • liberalisation of labour laws
  • lowering the minimum wage by 20% from 751 euros a month to 600 euros
  • negotiating a debt write-off with banks.

But the ministers demanded a further 325m euros in savings for this year. It is thought that the shortfall came because the Greek coalition could not agree to restructuring pensions.

The eurozone and IMF are also insisting that Greek leaders give "strong political assurances" on the implementation of the packages.

The ministers said the conditions must be fulfilled by next Wednesday, in time for another eurozone meeting to consider releasing the bailout funds.

The BBC's Mark Lowen in Athens says Greek politicians are frustrated that their planned cuts did not meet the demands of the eurozone and IMF.

But the government is likely to plough on, he says, because the prospect of bankruptcy and a potential exit from the eurozone strikes fear into the hearts of its leaders.

Greece cannot service its huge debt, and there are fears that a default could endanger Europe's financial stability and even lead to a break-up of the eurozone.

The country is already reeling from the effects of an earlier round of austerity that followed a previous bailout. Those cuts triggered widespread unrest and violent protests.

The country is deep in recession, with unemployment rising above 20%.

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