Greek bailout crisis: Brussels welcomes austerity vote

People walk past a damaged Eurobank branch in central Athens on February 13
Image caption Banks were wrecked during rioting in Athens on Sunday

The European Commission has welcomed the Greek parliament's decision to approve tough new austerity measures.

Economics commissioner Olli Rehn urged Greek officials to "take ownership" and fully implement the reforms, demanded by the EU in return for a huge bailout.

But the measures attracted massive protests throughout Greece. Buildings were set on fire in Athens and police used tear gas to disperse the crowds.

The government confirmed later that an election would be held in April.

Analysts say the biggest party in the governing coalition, the socialist Pasok, is likely to suffer at the hands of the electorate.

Greece is trying to secure a 130bn euro ($170bn; £110bn) bailout from the EU and IMF to prevent it defaulting on its massive debts. The deal, which has not yet been finalised, could write off around half of Greece's privately-held debt.

The austerity measures were demanded by the European Union as a precondition for releasing the funds.

Greece now has two days to meet two other EU demands: setting out exactly how it will make 325m euros of the promised savings, and giving written confirmation that the measures will be implemented regardless of the outcome of April's election.

European Union finance ministers are due to discuss their decision on the bailout package at a meeting on Wednesday.

Athens has been criticised for failing to implement many of the pledges it made in the first round of austerity measures, prompting concern from some EU politicians that the cuts might not be put into effect.

German Chancellor Angela Merkel hailed the vote as a "very important step" on the road to Greek stability, but insisted there "would not and cannot be any changes" to the austerity programme.

Mr Rehn meanwhile said the EU continued to stand by the Greek people, and insisted that the reforms were needed to ensure future economic growth.

"The Greek authorities and political forces should now take full ownership and make the case for the second programme and fully implement it in order to return the country to stable economic growth and job creation," he said.

The EU has been the target of much anger among Greeks, who see the reforms as piling unnecessary hardship on ordinary people.

The measures include slashing 15,000 public-sector jobs as part of a longer-term strategy to get rid of 150,000 civil servants.

The minimum wage is also to be cut by 20% to about 600 euros a month, and labour laws are to be liberalised to allow easier hiring and firing of staff.

Financial markets were up slightly after the austerity bill was passed.

But tens of thousands protested against the measures in Athens on Sunday night.

Most of the demonstrators protested peacefully, but small groups were involved in running battles with riot police.

They did huge damage to the city, attacking buildings with petrol bombs, and setting fire to banks, cinemas and cafes.

In all, 45 buildings are said to have burnt in the worst rioting for years. Other businesses were looted and badly damaged.

Athens and EU flag What went wrong in Greece?

What went wrong in Greece?

An old drachma note and a euro note
Greece's economic reforms, which 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.

What went wrong in Greece?

The opening ceremony at the Athens Olympics
Greece went on a big, debt-funded spending spree, including paying for high-profile projects such as the 2004 Athens Olympics, which went well over its budget.

What went wrong in Greece?

A defunct restaurant for sale in central Athens
The country 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.

What went wrong in Greece?

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. Widespread tax evasion also hit the government's coffers.

What went wrong in Greece?

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 debt, such as cuts to public sector pay and pensions, reduced benefits and increased taxes.

What went wrong in Greece?

Greece's problems have made investors nervous, which has made it more expensive for other European countries such as Portugal to borrow money.
Eurozone leaders are worried that if Greece were to default, and even leave the euro, it would cause a major financial crisis that could spread to much bigger economies such as Italy and Spain.

What went wrong in Greece?

Greek Prime Minister George Papandreou at an EU summit in Brussels on 26 March 2010
In 2010, the EU, IMF and ECB agreed a bailout worth 110bn euros (£92bn; $145bn) for Greece. Prime Minister George Papandreou quit the following year while negotiating its follow-up.

What went wrong in Greece?

Lucas Papademos
Lucas Papademos, who succeeded Mr Papandreou, has negotiated a second bailout of 130bn euros, plus a debt writedown of 107bn euros. The price: increased austerity and eurozone monitoring.

What went wrong in Greece?

In May 2012 elections a majority of voters backed parties opposed to austerity, but no group won an overall majority resulting in political deadlock. Fresh elections have been called in June.
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At least 170 people, most of them police officers, were hurt during the disturbances, and dozens of people were arrested.

Firefighters were still damping down some of the blazes on Monday.

Eurozone finance ministers will closely monitor the situation in Greece before making further decisions on the bailout package at Wednesday's meeting.

They rejected a previous set of measures proposed by Athens, demanding an extra 325m euros in savings.

Passing the austerity bill has cost Greece's coalition more than 40 MPs, who were dismissed after refusing to back the plan.

Several ministers have resigned, and a small right-wing party Laos, the junior member of the coalition, also withdrew its co-operation.