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Tensions rise over Greek debt deal

12 Feb, 2012 03:00 AM
ATHENS - Greece's cabinet approved a new austerity agreement yesterday, facing down massive angry public protests and ignoring the resistance by a handful of cabinet members who resigned over deeper spending cuts demanded by European leaders.

Determined to avoid a chaotic default, Greek Prime Minister Lucas Papademos said he was determined to push through the tough new austerity measures, in spite of the political turmoil rocking the country.

The plan is to be put to a vote in the 300-member Parliament tomorrow.

Five Greek cabinet members, including the Transport Minister and the Deputy Foreign Minister, handed in their resignations.

A total of six members of the 48-strong cabinet have now quit in the past two-days alone.

In addition, George Karatzaferis, leader of the right-wing LAOS party that is backing the three-party ruling coalition, said he would withhold his support for the new measures.

The wave of resignations came a day after eurozone finance ministers refused to agree to a second bailout for Greece, saying the country had not yet met all of their demands.

A group of angry rioters broke away from a peaceful demonstration of more than 11,000 people, setting fire and clashing violently with police.

European leaders have given Athens until this week to provide guarantees on the austerity measures and on the economic reforms that Greek leaders had promised in return for funding.

Addressing a cabinet meeting, Mr Papademos told ministers that if any of them were to vote against the new measures in a parliamentary ballot, they would have to leave the ruling coalition.

``A disorderly default would trigger economic chaos and social explosion,'' he said in a televised opening address to the cabinet.

Mr Papademos said the bailout deal with private creditors would return Greece to growth next year and deliver a 4.5 per cent primary surplus in 2012, better than an earlier prediction of 1.1 per cent of gross domestic product.

If the Greek government continues to fail to satisfy the austerity demands of the European Union and the International Monetary Fund, it will not receive a 130 billion euro ($160.04 billion) aid package, risking a chaotic default when it faces a bond repayment in March.

The cuts include a 22 per cent drop in the minimum wage, public sector layoffs and spending cuts to health, social security and defence budgets.

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A protester hurls rocks at riot police during clashes in Athens's Syntagma square yesterday.
A protester hurls rocks at riot police during clashes in Athens's Syntagma square yesterday.

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