Greek PM Says Default Would Lead To "chaos"

Published February 10, 2012 7:09PM (EST)

ATHENS, Greece (AP) — Greece's future in the eurozone grew increasingly precarious Friday as violence erupted on the streets of Athens and dissent grew among its lawmakers after European leaders demanded deeper spending cuts.

The country's beleaguered coalition government promised Friday to push through the tough new austerity measures and rescue a crucial euro130 billion ($170 billion) bailout deal, as six members of the Cabinet resigned.

Prime Minister Lucas Papademos promised to "do everything necessary" to ensure parliament passes the new austerity measures that would slap Greeks with a minimum wage cut during a fifth year of recession.

"It is absolutely necessary to complete the effort that began almost two years to consolidate public finances, restore competitiveness and economic recovery," Papademos told an emergency Cabinet meeting.

Debt-stricken Greece needs the bailout money before a euro14.5 billion bond deadline on March 20 and strike a vital debt-relief deal with bond investors.

He said the bailout and a related debt-reduction deal with private creditors would return Greece to growth next year, and deliver 4.5 percent primary surplus in 2012 — better than an earlier official prediction of 1.1 percent of gross domestic product.

"A disorderly default would cast our country into a catastrophic adventure. It would create conditions of uncontrollable economic chaos and social explosion," he warned.

"Greeks' standard of living in the event of a disorderly default would collapse, and the country would be swept into a deep vortex of recession, instability, unemployment and penury. These developments would lead, sooner or later, to exit from the euro."

Earlier Friday, a small right-wing party in Papademos' coalition said it would not back the new measures and four of its officials in the cabinet resigned, including the country's transport minister.

Two Socialists cabinet members have also quit.

Greece has promised to approve the new austerity measures by late Sunday, despite deep public resentment.

Violent clashes broke out in front of parliament earlier in the day, amid mass protests organized by unions, which launched a 48-hour general strike.


By Salon Staff

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