Greece passes new spending cuts

Greek lawmakers have narrowly passed a crucial austerity bill by majority vote, but with heavy dissent from within the three-party governing coalition.

Violent protests precede austerity vote

A masked protester raises his fist during a violent demonstration in Syntagma Square in central Athens Wednesday. (Yannis Behrakis/Reuters)

Greek lawmakers have narrowly passed a crucial austerity bill by majority vote, but with heavy dissent from within the three-party governing coalition.

Immediately after the vote early Thursday and before the tally had been officially announced, two of the coalition parties expelled a total of seven dissenting deputies from their ranks.

The third party in the coalition, the small Democratic Left, mostly voted "present" — in essence abstaining from the vote.

Earlier Wednesday, a demonstration against the bill by more than 80,000 people in Athens degenerated into violence as hundreds of protesters clashed with riot police.

The vote was the toughest test yet for the country's fragile four-month-old coalition government, which had to pass the €13.5 billion ($17 billion Cdn) package of measures to ensure Greece continues receiving vital bailout funds from its international creditors to avoid bankruptcy.

Hundreds of protesters hurled rocks and gasoline bombs at lines of riot police guarding parliament, who responded with volleys of tear gas and stun grenades, and the first use of water cannon in Greece in years.

Some in the demonstration ran for cover as running battles broke out with police on the second day of a 48-hour general strike.

Clouds of tear gas rose from Syntagma Square.

Inside the parliament building, lawmakers interrupted the debate as parliament employees went on strike to protest cuts to their wages brought by Finance Minister Yannis Stournaras in an amendment to the austerity bill.

Stournaras later withdrew the amendment, and the tempestuous debate resumed after parliament employees returned to work.

Greece runs out of money Nov. 16

"This bill not only demonstrates that this country will honor its international commitments in return for the major amounts of assistance it has received, it is a commitment to proceed with major structural reforms," Stournaras said.

The government combined has 176 of parliament's 300 seats, and needed a simple majority of those present to pass the bill.

Without the Democratic Left, which voted against the bill, Prime Minister Antonis Samaras's conservatives and the Socialists control 160 votes.

Greece's next bailout loan instalment of €31.5 billion, out of a total of €240 billion, is already five months overdue.

Without it, Samaras said, Greece will run out of money on Nov. 16.

If Athens cannot raise sufficient funds otherwise, it will quickly find it impossible to pay its huge debts.

As well as pushing the country out of the 17-country group that uses the euro, this could trigger a nightmare of bank runs, hyperinflation and currency depreciation that would vaporize savings and put many basic goods out of the reach of many Greeks.

"We must vote in favour of the measures," conservative New Democracy lawmaker Constantinos Tassoulas urged parliament. "It is our duty."

The measures being debated are for for 2013-14 and include new deep pension cuts and tax hikes, a two-year increase in the retirement age to 67, and laws that will make it easier to fire and transfer civil servants who are currently guaranteed jobs for life.

A riot police officer is engulfed by petrol bomb flames thrown by protesters in front of the Greek parliament in Athens. (Dimitri Messinis/Associated Press )

The country is suffering a deep recession set to enter a sixth year, and record high unemployment of 25 per cent.

"You are throwing people onto to the street, people who need a few more years till they get their pensions," said Panagiotis Lafazanis, parliamentary spokesman for the main opposition Syriza, or Radical Left, party.

"What will happen to them. Will they starve?… This is an illegal and unconstitutional law."

Opposition parties accused the government of trampling on Greece's constitution with the proposed cuts in pensions and benefits, and complained that the bill, several hundred pages long, was too complex to be debated in a single session.

Meanwhile, judges in the country's Supreme Court ruled that new cuts to their own pay contained in the draft bill were illegal.

Socialist MP Theodora Tzakri verbally shredded the bill, but said she was forced to back it as Greece had no other way of raising the funds it needs.

"The recession has exceeded every limit, and not only is no light visible at the end but we are still at the beginning of the crisis," Tzakri said.

"I will vote for the measures with a gun to my forehead."

Greece's main trade association warned that the new cutbacks would further reduce consumer and government spending, driving even more retailers out of business.

Society 'exhausted and battered'

"To vote for the measures ... will deal the coup de grace to an exhausted and battered society," association head Vassilis Korkidis said.

While Samaras has been facing increasing pressure at home, other members of the 17-country eurozone have been doing what they can to ensure Greece stays in the currency group.

Germany's Chancellor Angela Merkel, for example, has softened her previous tough stance — paving the way for a deal to let Greece take more time to meet loan conditions. Even if parliament approves the draft legislation, it is unlikely that Greece will receive the next bailout instalment in time for Samaras's Nov. 16 deadline.

The payment was expected to be approved at a meeting of European finance ministers on Monday Nov. 12.

However, the ministers' vote hinges on a report by the so-called troika of austerity inspectors from the European Union, IMF and European Central bank, which may not be ready in time.

Furthermore, some eurozone countries can only give the go-ahead after their own parliaments have voted on it. Germany is not expected to do so before Nov. 19.

As a result, the EU or ECB may have to step in with some interim financing. The 48-hour general strike against the bill shut down the public administration, left hospitals functioning on emergency staff and closed schools and tax offices.

All ferry and train schedules have been cancelled until Thursday, flights were disrupted by a four-hour air traffic controllers' strike and Athens was without public transport for most of the day.

The country's biggest union has also called for a demonstration on Sunday evening, when the 2013 state budget is due to be voted on.