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Posts tagged "Eurozone"

h/t: Brian Tashman at RWW

arnabocean:

A bit of explanation on the Cyprus situation.

Why are Cypriot banks so big? Because the country is a tax haven where corporations and wealthy foreigners stash their money. Officially, 37 percent of the deposits in Cypriot banks come from nonresidents; the true number, once you take into account wealthy expatriates and people who are only nominally resident in Cyprus, is surely much higher. Basically, Cyprus is a place where people, especially but not only Russians, hide their wealth from both the taxmen and the regulators. Whatever gloss you put on it, it’s basically about money-laundering.

And the truth is that much of the wealth never moved at all; it just became invisible. On paper, for example, Cyprus became a huge investor in Russia — much bigger than Germany, whose economy is hundreds of times larger. In reality, of course, this was just “roundtripping” by Russians using the island as a tax shelter.

It’s similar, Krugman says, to what happened in Iceland during the financial crisis, and how Iceland handled the situation then may be a good model for Cyprus to follow too.

Great piece from the always excellent Dr. Krugman.

(A great book on the precipitation of the financial crisis in nations such as Iceland, Greece and Ireland is Boomerang, by Michael Lewis. Go read it if you’re interested in this topic, highly recommended.)

thepeoplesrecord:

The Bulgarian winter or protests against corruption, poor living conditions & high energy costs
March 16, 2013

From the beginning of February, Bulgarians in most big cities have been out in the streets, protesting against the increased electricity and heating bills. While the increase has happened gradually throughout 2012, in January 2013 the bills were considerably bigger than they would normally get. The price formation was transparently written down on the bill, but what angered many is that a significant amount of money was charged not for energy per se but for various taxes and tariffs.

Bills and bonds

A wave of contention spread throughout the country, resulting in blockades of roads, barricades, increasing popular rage and police violence. Three men died having set fire to themselves in protest at the bills and the subservience of the state to economic interests. One old man cut his veins out of sheer desperation over his electricity bill. The protesters were mostly rank-and-file Bulgarians: middle-aged men and women, young couples with children and students all went out on the streets to voice their concerns over high energy costs, mediocre living standards and perceived corruption. The protests were also joined and partly hijacked by a number of extreme-right groups, who were ready to exploit the situation for harassment and looting.

The solution offered by many intellectuals, politicians from throughout the political spectrum and the media, was – surprise, surprise – the end of monopolies and further privatization and liberalization of the energy market.

This posture disappointed many, as the whole process is actually a showcase example of how privatized entities function poorly outside state control. The national power distribution companies were privatized in 2005 and then sold out to foreign companies under very favourable conditions. This move made the state – i.e. taxpayers – indebted to the private companies, which held prices high with a cartel agreement.

Yet, it was not the monopoly in general that was a problem: the issue was eclipsed by the amnesia of 23 years of transition to a market economy. It was the monopoly in the hands of uncontrollable private companies within a free market economy with no state regulation or protection that has left the population totally vulnerable to price hikes. The clamour around the energy bills also eclipsed some contradictory actions of the Borisov government. To calm down grain producers who also threatened nation-wide protests, populist Borisov promised new subsidies. Consequently, days before his resignation, Borisov pressed Finance Minister Dyankov to issue government bonds for 800 mio lev (€409 mio). Thanks to the unexpected shock for the national economy, and to the surprise of the international markets, the country’s bond yields started to rise and the value of the Bulgarian debt went down. But it was mostly Bulgarian banks who bought most (over 80%) of the bonds, raising suspicions of a deal to help Borisov’s reelection.

The crisis becomes political

Bills and bonds aside, the crisis of political representation had started. After a few nights of running battles between police and protesters, the government made an attempt to offer some blatantly unsustainable concessions: they offered a significant decrease of energy prices and transparency of the energy sector.

A few “protesters” coming from circles close to the government called for the protests to stop, to little effect. The people demanded Borisov’s resignation. After a night of violent clashes with the police, Borisov filed his resignation, saying he could not tolerate blood on his hands. The resignation was almost unanimously approved by parliament.

President Rossen Plevneliev launched “public consultations” to find a way out of the political crisis and form a new government. In his office, along with representatives of the protesters, he invited neoliberal think-tank experts and members of oligarchic and commercial organizations. The protesters soon walked out. Plevneliev offered the mandate only to the three parties which had previously proposed to form a government: Borisov’s centre-right Citizens for European Development of Bulgaria (GERB), social-democratic Bulgarian Socialist Party (BSP), and the Turkish ethnic Movement for Rights and Freedoms party (DPS) – all refused. This meant the dissolution of the Parliament, the calling of new elections in May and the appointment by the President of an interim “expert” government.

This outcome didn’t satisfy the protesters, who saw it as a convenient way for the current government to gain time to erase their record of corruption and avoid investigation or persecution. And this government shows no intention of reforming electoral laws ahead of the elections, when the current electoral code makes it exceptionally difficult for small parties to run for office.

People did not leave the streets. Demands for the electricity bills to be lowered were soon followed by more radical claims: a new Constitutive Assembly, elections by majority vote with no parties, only individual candidates, and the revision of all privatization deals and concessions of the last 20 years.

Full article

(via zalatix)

(Reuters) - Arm raised in a Nazi-style salute, the leader of Greece’s fastest-rising political party surveyed hundreds of young men in black T-shirts as they exploded into cheers. Their battle cry reverberated through the night: Blood! Honour! Golden Dawn!

"We may sometimes raise our hand this way, but these hands are clean, not dirty. They haven’t stolen," shouted Nikolaos Mihaloliakos as he stood, floodlit, in front of about 2,000 diehard party followers filling an open-air amphitheatre at Goudi park, a former military camp near Athens.

"We were dozens, then a few hundred. Now we’re thousands and it’s only the beginning," cried the leader of Golden Dawn, a far-right party that is seeing its support soar amid Greece’s economic collapse. Last month’s rally revealed the party, which describes itself as nationalist and pledges to expel all illegal foreigners, has a new-found sense of triumph, even a swagger, that some find menacing.

Riding a wave of public anger at corrupt politicians, austerity and illegal immigration, Golden Dawn has seen its popularity double in a few months. A survey by VPRC, an independent polling company, put the party’s support at 14 percent in October, compared with the seven percent it won in June’s election.

Political analysts see no immediate halt to its meteoric ascent. They warn that Golden Dawn, which denies being neo-Nazi despite openly adopting similar ideology and symbols, may lure as many as one in three Greek voters.

"As long as the political system doesn’t change and doesn’t put an end to corruption, this phenomenon will not be stemmed," said Costas Panagopoulos, chief of ALCO, another independent polling company. "Golden Dawn can potentially tap up to 30 percent of voters."

The party now lies third in the polls, behind conservative New Democracy and the main opposition, the radical leftist Syriza. Violent behavior by Golden Dawn members, who often stroll through run-down Athens neighborhoods harassing immigrants, seems to boost rather than hurt the party’s standing.

As the government imposes yet more austerity on an enraged public, the collapse of the ruling conservative-leftist coalition remains on the political horizon. The possibility that Golden Dawn could capture second place in a snap election is slim but real, say pollsters.

Analysts believe that, ultimately, the party lacks the broad appeal and structure needed to gain mass traction. In World War Two Greece suffered massacres and famine in its fight against the Nazis, and the spectre of the 1967-1974 military junta still hangs heavy over its modern politics. So why are many Greeks now turning to a party whose emblems and rhetoric, critics say, resemble Hitler’s?

Golden Dawn denies any such resemblance. In an interview with Reuters at an open-air cafe in the Athens district of Papagou, a traditional neighbourhood for military personnel, Ilias Panagiotaros, a Golden Dawn lawmaker and spokesman, explained the party’s appeal. “Golden Dawn is the only institution in this country that works. Everything else has stopped working or is partially working,” he said.

"We operate like a well-organized army unit, because the military is the best institution in any country." Greece’s far-right party goes on the offensive (PDF) link.reuters.com/rut83t > Greece’s other debt problem (PDF) link.reuters.com/ryq82t

Short, squat and combative, Mihaloliakos once praised Hitler and denied the Nazi gas chambers existed. A former special forces commando in the Greek army, he met the leaders of the Greek military junta while in prison for carrying illegal weapons and explosives as a member of a far-right group in 1979.

When pressed on such issues, Golden Dawn says they are all in the past and it is looking to the future.

For years after Mihaloliakos founded the party in 1985 it remained marginal: in the 2009 elections Golden Dawn won just 0.29 percent of the vote, or fewer than 20,000 votes. Yet in June, the party amassed votes from across the political spectrum, wiping out the more moderate nationalist LAOS party and winning support from as far left as the communist KKE party, pollsters said.

Now it is stealing votes from New Democracy, which flip-flopped on the international bailout keeping Greece afloat and, after coming to power, imposed harsh cuts instead of relief measures. Though Golden Dawn attracts mainly urban male voters up to 35 years old, the party is also gaining its share of women and the elderly, primarily those suffering unemployment or falling living standards, say pollsters.

Part of its appeal is down to the sort of welfare work that Hamas, the Palestinian party, does in Gaza. Golden Dawn distributes food in poor neighborhoods, helps old ladies get money safely from ATMs - and has also set up a Greeks-only blood bank.

A short film showed highlights of the year, which included attacks on immigrant street vendors, clashes with police outside parliament and food distribution to the poor. When the film showed Golden Dawn lawmaker Ilias Kasidiaris slapping a female communist lawmaker, Liana Kanelli, across the face on live TV, youths bellowed profanities against the victim.

"Golden Dawn’s target is simple. We want the absolute majority in parliament so we can replace the constitution with our own," Kasidiaris told the crowd. “It will then be easy to immediately arrest and deport all illegal immigrants.”

Pollsters were ready to write off the party when Kasidiaris slapped Kanelli after she swatted him with some papers during a dispute he was having with a Syriza lawmaker. Kasidiaris says he was defending himself; Kanelli says she was coming to the aid of the Syriza lawmaker after Kasidiaris had thrown water at her.

Painting Golden Dawn as an aberration stemming from the financial crisis, pollsters said the party’s support would dwindle. The opposite happened - the party gained 3 to 4 percentage points in polls as a direct result of the Kasidiaris incident.

In parliament Golden Dawn’s 18 lawmakers cluster in a rear corner of the marble-covered hall, but make no attempt to hide their ideology. Recently, Panagiotaros asked the welfare ministry to find out which babies admitted to state day-care centers were actually Greek. Eleni Zaroulia, wife of party leader Mihaloliakos and also a lawmaker, described immigrants as “every sort of sub-human who invades our country carrying all sorts of diseases.”

Artemis Matthaiopoulos, another Golden Dawn lawmaker, was formerly the bassist for a heavy metal band called Pogrom, which produced songs such as “Speak Greek or Die” and “Auschwitz”.

Rights groups say racist attacks in Greece have been surging, but that many immigrants are reluctant to report them because of their illegal status or mistrust of the police.

Like other victims, he accuses Greek police of supporting Golden Dawn and hindering immigrants in reporting attacks. In a July report, advocacy group Human Rights Watch said gangs of Greeks were regularly attacking immigrants with impunity and authorities were ignoring victims or discouraging them from filing complaints.

Greek police deny accusations they are soft on, or even sometimes work with, Golden Dawn. Public Order Minister Nikos Dendias has vehemently denied reports that police were beating up illegal immigrants and has threatened to sue British newspaper The Guardian over the issue. He is at such odds with Golden Dawn that the party ridiculed him during the youth festival at Goudi park.

But a member of the police officers’ union, speaking to Reuters on condition of anonymity, admitted there was some sympathy for the party among the ranks. “There are some among the police who ideologically support Golden Dawn and a handful that have been violent against illegal immigrants,” the unionist said. “But these cases are being probed by justice.”

H/T: Reuters

Greek lawmakers approved the country’s 2013 austerity budget early Monday, an essential step in Greece’s efforts to persuade its international creditors to unblock a vital rescue loan installment without which the country will go bankrupt.

The budget passed by a 167-128 vote in the 300-member Parliament. It came days after a separate bill of deep spending cuts and tax hikes for the next two years squeaked through with a narrow majority following severe disagreements among the three parties in the governing coalition.

Prime Minister Antonis Samaras pledged that the spending cuts will be the last Greeks have to endure.

"Just four days ago, we voted the most sweeping reforms ever in Greece," he said. "The sacrifices (in the earlier bill and the budget) will be the last. Provided, of course, we implement all we have legislated. "

Finance ministers from the 17-nation Eurozone are meeting in Brussels later Monday, with Greece high on the agenda. However, German Finance Minister Wolfgang Schaeuble has indicated it is unlikely that the ministers will decide on the disbursement at that meeting.

"We all … want to help Greece, but we won’t be put under pressure," Schaeuble told the weekly newspaper Welt am Sonntag.

Schaeuble said the so-called troika of debt inspectors likely won’t deliver their report on Greece’s reform program by Monday. The creditors also want to see what the debt inspectors have to say about Greece’s debt sustainability.

But speaking minutes before the vote, Samaras pledged the bailout funds would be disbursed “on time.”

Disbursement of the next installment is essential “because the state’s available funds are marginal, although better than expected because the 2012 budget is being executed better than expected,” he said, adding that the funds are needed to pay salaries and pensions, as well as for the import of medicines, fuel and food.

Hours before the vote, 15,000 people converged outside Parliament in a peaceful demonstration. The crowd was far smaller than the 80,000-strong crowd which protested last Wednesday’s austerity bill vote. That demonstration degenerated into violent clashes between riot police and hundreds of protesters.

Greece is mired in a deep recession heading into its sixth year, with more than a quarter of Greeks unemployed. Battered by a mountain of debt and a gaping budget deficit, Greece has been relying on international bailout loans from other Eurozone countries and the International Monetary Fund since May 2010.

Alexis Tsipras, the head of the main opposition Radical Left Coalition party, or Syriza, insisted the new austerity cuts are unfair and would leave Greeks unable to buy essentials such as food, fuel and medicine this winter.

"This is why we say you are dangerous for this country," Tspiras said, addressing the government. "You are incapable of negotiating."

Tspiras promised to repeal the austerity laws and negotiate “on an equal footing” with the country’s creditors if he were to come to power.

The poll showed Syriza, which placed second in the June elections, ahead of the coalition leader, the center-right New Democracy party, by nearly 3 percentage points. The extreme right-wing nationalist Golden Dawn party continued its strong showing with more than 10 per cent of respondents preferring it.

h/t: CBC.ca

(via Fake Business Network (FBN) Blames Obama’s Victory For Stock Market Dip)

After Fox News grudgingly called the election for President Obama early Wednesday morning, Fox Business quickly started hawking the idea that a stock market drop on Wednesday morning was in response to Obama’s victory. Stuart Varney and Ed Butowsky claimed the decline was because “the takers have taken over” and investors are afraid of tax hikes:

VARNEY: Dow Industrial is down 177. That is a sell-off. Is it an Obama sell-off? We’ll discuss. With Obama’s victory, the takers have taken over. The makers are clearly in the minority. Am I right? It’s a sell-off the day after the election, with an Obama second term we’re down 183 points.
[…]

VARNEY: And it’s a reaction to the Obama victory?

BUTOWSKY: I don’t see anything else except what’s going on in Europe as well.

VARNEY: Okay, so stocks down, bonds up and this is largely a reaction to the Obama victory.

BUTOWSKY: Without any question in my mind.

In fact, as the Washington Post explained, the market responded positively to Obama’s reelection early in the day, but soon plunged over concerns of the Republican-divided Congress playing chicken with the upcoming fiscal cliff and a slew of bad economic news out of Europe. (And, of course, stock moves are rarely attributable to any one event.)

ATHENS/MADRID, Sept 26 (Reuters) - Demonstrators clashed with police on the streets of Athens and Madrid on Wednesday in an upsurge of popular anger at new austerity measures being imposed on two of the euro zone’s most vulnerable economies.

In some of the most violent confrontations, Greek police fired tear gas at hooded rioters hurling petrol bombs as thousands joined the country’s biggest protest in more than a year.

The unrest erupted after nearly 70,000 people marched to the Greek parliament chanting “EU, IMF Out!” on the day of a general strike against further cuts demanded by foreign lenders.

"We can’t take it anymore - we are bleeding. We can’t raise our children like this," said Dina Kokou, a 54-year-old teacher and mother of four who lives on 1,000 euros ($1,250) a month.

In Madrid, Prime Minister Mariano Rajoy faced violence on the streets of the capital and growing talk of secession in Catalonia as he moves cautiously closer to asking Europe for a bailout, aware that such an action has cost other European leaders their jobs.

In public, Rajoy has been resisting calls to move quickly to request assistance, but behind the scenes he is putting together the pieces to meet the stringent conditions that will accompany rescue funds.

Rajoy is gradually shedding his reluctance to seek a sovereign bailout for the euro zone’s fourth biggest economy - a condition for European Central Bank intervention to cut his country’s borrowing costs.

He suggested on Wednesday that he would make the move if debt financing costs remained too high for too long.

"I can assure you 100 percent that I would ask for this bailout," he told the Wall Street Journal.

He also said he had not made his mind up on whether to allow pensions to rise in step with inflation, which could cost the government an extra 6 billion euros this year.

"We need to be sufficiently flexible in order not to create any further problems," he said when asked about pensions.

His remarks, coupled with the central bank’s warning on the economy helped drive up Spain’s borrowing costs, with the yield on the benchmark 10-year bond jumping to 6 percent, a level seen as unsustainable in the medium term. The index of leading stocks fell 3.46 percent to a two-week low.

SAMARAS FACES TEST

With Rajoy under new pressure from the Catalans, his fellow euro zone struggler, Greek Prime Minister Antonis Samaras, also faced a major test, in the shape of a 24-hour strike called by the country’s two biggest unions.

Ships stayed in port, museums and monuments were shut and air traffic controllers walked off the job. Trains and flights were suspended, public offices and shops were shut, and hospitals provided a reduced service.

Union anger is directed at spending cuts worth nearly 12 billion euros ($16 billion) over the next two years that Greece has promised the European Union and International Monetary Fund in an effort to secure its next tranche of aid.

The bulk of those cuts is expected to come from cutting wages, pensions and welfare benefits, heaping a new wave of misery on Greeks who say repeated rounds of austerity have pushed them to the brink and failed to transform the country for the better.

h/t: Huffington Post, via Reuters

Angela Merkel is poised to allow the eurozone’s €750bn bailout fund to buy up the bonds of crisis-hit governments in a desperate effort to drive down borrowing costs for Spain and Italy and prevent the single currency from imploding.

Germany has long opposed allowing the eurozone’s rescue fund, the European Financial Stability Facility, to lend directly to troubled eurozone countries, fearing that Berlin would end up paying the bill, and the beneficiaries would escape the strict conditions imposed on Greece, Portugal and Ireland.

But Merkel has come under intense pressure as financial markets have pushed up borrowing costs for Spain to levels that many analysts see as unsustainable.

Analysts are likely to see the decision as the first step towards sharing the burden of troubled countries’ debts across the single currency’s 17 members, though it falls short of the “eurobonds” proposed by the European commission president José Manuel Barroso.

The proposal was discussed on the margins of the two-day G20 summit in Los Cabos, Mexico, which has been dominated by the depressing impact of the eurozone crisis on the world economy.

G20 officials believe an announcement could be made by the leaders of the eurozone in the next few days, but stressed they remained unclear as to timing and precise content.

It would be the first time the EU bailout funds have been used directly to purchase Spanish debt. It is understood the money would come from both the €500m European Stability Mechanism and its predecessor, the €250m European Financial Stability Facility.

Britain does not contribute to either fund.

Last week EU leaders had agreed a line of credit to Spanish banks through the Spanish government, a move that failed to reduce Spanish bond yields.

Madrid was granted a €100bn bailout from its European partners earlier this month to shore up its financial sector. But news that the full extent of the shortfall of the banks will not be known until the autumn underlined the sense of chaos.

There was speculation that the full total required could end up being far more than €100bn. Madrid was forced to pay a record 5.7% at a debt auction on Tuesday morning to borrow €2.4bn for just 12 months, prompting analysts to say Spain is edging perilously close to needing a full-blown rescue.

h/t: Patrick Wintour at TPM, via The Guardian

The political and economic dynamics threatening the European monetary union are complicated enough on their own. But there’s tremendous uncertainty about which choices European voters and leaders will make, and each hypothetical outcome there prefigures even more difficult-to-forecast consequences in the United States.

Still, economists and analysts have examined a range of scenarios — from ongoing recession in Europe, to a disorderly dissolution of the Euro and ensuing depression. And even the least bad of likely outcomes across the Atlantic will continue to put downward pressure on already-sluggish U.S. economic growth.

Late last year, Reuters looked at the consequences for the U.S. of a mild European recession, a protracted Euro recession, and a full-on meltdown. The upshot is that the American recovery can weather the Euro crisis even if leaders there insist on muddling through instead of taking the sorts of politically difficult actions experts say would be required to fix the problems there.

That was November 2011. Since then the U.S. economy has cooled down. But the same basic threat assessment holds up today, according to Dean Baker, co-founder of the Center for Economic and Policy Research.

“Such turbulence in Europe, with the massive wealth destruction, bankruptcies and a collapse in confidence in European integration and cooperation, would most likely result in a deep depression in both the exiting and remaining euro area countries, as well as in the world economy,” the Organisation for Economic Co-operation and Development said last year.

Big U.S. financial institutions have taken steps to protect themselves from direct exposure to a European financial collapse. But the falloff in demand, and a worldwide financial flight-to-safety, would likely lead to a significant decline in U.S. GDP, which would be exacerbated if European countries and the United States didn’t quickly abandon the austerity programs baked into their current budgets.

“The spillover effects, the chain of consequences are very difficult to assess,” said International Monetary Fund President Christine Lagarde last month. “We can certainly assume that it would be quite messy.”

h/t: Brian Beutler at TPM

BERLIN — Eurozone countries extended Sunday a hand of compromise to Greece after the victory of parties supporting the country’s international bailout, signalling some flexibility on the painful reforms.

“There can’t be substantial changes in the engagements” undertaken by Greece in the bailout deal. “But I can imagine we discuss again a delay” in achieving the targets, he said on Germany’s ARD public television.

The job, spending and wage cuts required under the 130 billion euro ($165 billion) bailout were a key issue among voters in Sunday’s Greek parliamentary election, with all parties calling for a relaxation of the terms if not outright cancellation of the deal.

Germany has been one of the most hardline eurozone nations and insisted that Greeks have to implement the agreed deal if they want the bailout funds needed to keep the country from going bankrupt and possibly exiting the euro.

French Finance Minister Pierre Moscovici said eurozone finance ministers would soon release a statement on how they will approach the situation in Greece.

German Finance Minister Wolfgang Schäuble called the results a “decision by Greek voters to forge ahead with the implementation of far-reaching economic and fiscal reforms in the country.”

But Belgium’s Foreign Minister Didier Reynders said that there is “room for maneouvre” on the time Greece needs to deliver on bailout commitments.

New Democracy party won the election and will be able to form a pro-bailout majority with the socialist PASOK party.

But even New Democracy chief Antonis Samaras has called for the terms of the bailout deal to be revised.

Revising the deal doesn’t come without risks to the eurozone however. Too much flexibility risks calling the Eurozone’s credibility on seeing painful but necessary reforms being carried through.

Too much flexibility also risks provoking calls for leniency from Ireland and Portugal, which are struggling to implement austerity policies.

The anti-austerity leftist Syriza party, which placed second, had vowed to tear up he European Union and the International Monetary Fund bailout deal that has given Greece a credit lifeline in exchange for harsh spending cuts.

“There is no other road but reforms,” said Westerwelle.

However there appears to be greater appreciation of the austerity fatigue among Greeks, who are now suffering through a fifth year of recession.

H/T: The Raw Story

thepoliticalfreakshow:

Update: Spain will request EU financing for its banks, finance minister says; aid conditions will apply only to banks - @WSJbreakingnews

ATHENS, Greece — Greek lawmakers on Monday approved harsh new austerity measures demanded by bailout creditors to save the debt-crippled nation from bankruptcy, after rioters in central Athens torched buildings, looted shops and clashed with riot police.

The historic vote paves the way for Greece’s European partners and the International Monetary Fund to release $170 billion (euro130 billion) in new rescue loans, without which Greece would default on its mountain of debt next month and likely leave the eurozone – a scenario that would further roil global markets.

Lawmakers voted 199-74 in favor of the cutbacks, despite strong dissent among the two main coalition members. A total 37 lawmakers from the majority Socialists and conservative New Democracy party either voted against the party line, abstained or voted present.

Sunday’s clashes erupted after more than 100,000 protesters marched to the parliament to rally against the drastic cuts, which will ax one in five civil service jobs and slash the minimum wage by more than a fifth.

At least 45 businesses were damaged by fire, including several historic buildings, movie theaters, banks and a cafeteria, in the worst riot damage in Athens in years. Fifty police officers were injured and at least 55 protesters were hospitalized. Forty-five suspected rioters were arrested and a further 40 detained.

Since May 2010, Greece has survived on a $145 billion (euro110 billion) bailout from its European partners and the International Monetary Fund. When that proved insufficient, the new rescue package was approved. The deal, which has not yet been finalized, will be combined with a massive bond swap deal to write off half the country’s privately held debt.

As protests raged Sunday, demonstrators set bonfires in front of parliament and dozens of riot police formed lines to keep them from making a run on the building. Security forces fired dozens of tear gas volleys at rioters, who attacked them with firebombs and chunks of marble broken off the fronts of luxury hotels, banks and department stores.

Clouds of tear gas drifted across the square, and many in the crowd wore gas masks or had their faces covered, while others carried Greek flags and banners. Masked rioters also attacked a police station with petrol bombs and stones.

A three-story building was completely consumed by flames as firefighters struggled to douse the blaze. Streets were strewn with stones, smashed glass and burnt wreckage, while terrified passers-by sought refuge in hotel lounges and cafeterias.

"I’ve had it! I can’t take it any more. There’s no point in living in this country any more," said a distraught shop owner walking through his smashed and looted optician store.

Athens Mayor Giorgos Kaminis said rioters tried to storm the City Hall building, but were repelled. “Once again, the city is being used as a lever to try to destabilize the country,” he said.

Conservative New Democracy leader Antonis Samaras said the rioting “hurts the entire country.”

"We are seeing scenes from a future that we must do our utmost to avert," he said.

Papademos’ government – an unlikely coalition of the majority Socialists and their main foes, New Democracy – had been expected to carry the austerity vote. Combined, they control 236 of Parliament’s 300 seats.

Still, they faced strong dissent: Besides the 37 lawmakers who voted against the bill or abstained, a further six voted against sections of the proposed measures. After the vote, the coalition government announced those 43 lawmakers had been expelled.

Finance Minister Evangelos Venizelos said the measures were vital to the country’s very economic survival.

"The question is not whether some salaries and pensions will be curtailed, but whether we will be able to pay even these reduced wages and pensions," he told lawmakers before the vote. "When you have to choose between bad and worse, you will pick what is bad to avoid what is worse."

The new cutbacks, which follow two years of harsh income losses and tax hikes amid a deep recession and record high unemployment have been demanded by Greece’s bailout creditors in return for a new batch of vital rescue loans.

Greece’s eurozone partners, meanwhile, kept up the pressure for real reform.

German Finance Minister Wolfgang Schaeuble was quoted as telling the Welt am Sonntag newspaper on Sunday that Greece “cannot be a bottomless pit.”

Highlighting previous pledges he said weren’t kept, Schaeuble said “that is why Greece’s promises aren’t enough for us any more.”

Asked whether Greece has a long-term future in the eurozone, Germany’s Vice Chancellor Philip Roesler said “that is now in the hands of the Greeks alone.”

h/t: Huffington Post

Italian Prime Minister Silvio Berlusconi is coming under increasing pressure to resign as Italy struggles to deal with its worsening economic crisis. Earlier today, one of Berlusconi’s main coalition partners, Umberto Bossi of the Northern League, urged him to step aside ahead of a crucial budget vote. With the third biggest economy in the eurozone, the economic crisis facing Italy is considered to be far more dangerous than Greece. Many economists believe that Italy’s borrowing costs are approaching levels that may force the nation to ask for a massive bailout — far bigger than the bailouts for Greece, Ireland or Portugal.