BERLIN – Greece’s parliament passed tough new austerity measures Thursday amid violent protests and major strikes in Athens.
At the same time, top German officials cautioned that major steps to secure the future of the euro would not make a promised weekend deadline because of a deadlock on how to proceed.
The new measures in Greece, which would cut 30,000 civil servants from government payrolls, raise taxes and whittle collective bargaining rights, were approved by a narrow majority as a last-chance bid to convince the nation’s creditors and Europe that it is serious about getting on a better economic track. But analysts said that the policies could actually hurt Greece’s economy as much as help it, and massive protests in Athens in recent days suggest that ordinary Greeks agree.
In Parliament, Greece’s leaders said that the measures would help safeguard the country’s future.
Without them, “the country will … once again serve as the scapegoat on which Europe’s historic, political and institutional shortcomings will be dumped,” Finance Minister Evangelos Venizelos told lawmakers.
European leaders’ persistent arguing over how best to save the euro showed no sign of abating. German Chancellor Angela Merkel called off a Friday speech to her nation’s parliament in which she was to have outlined her aims for a comprehensive restructuring of Greece’s debt, for bank recapitalization and for revising Europe’s economic governance.
She and French President Nicolas Sarkozy had said they would introduce plans at a major summit on Sunday. Merkel’s spokesman said late Thursday that the presentation was canceled and that the two leaders would hold a second summit on Wednesday.
Germany and its partners “are not yet sufficiently advanced” on negotiations “to be able to reach final decisions on Sunday,” said spokesman Steffen Seibert in Berlin.
European leaders and investors have written off Greece’s ability to ever repay its debts in full, even at the more favorable terms that were reached in July. Plans are now shaping up for investors in Greek bonds to accept larger losses than had been expected, to relieve some of the burden on the country, but France and Germany have deep disagreements about how to do it.
To cut Greece’s debt without setting off panic that other struggling countries — such as Ireland and Portugal -- would seek the same and not repay their debts, Merkel, Sarkozy and other leaders are pushing for tough measures to make default unpalatable elsewhere. Fears that struggling countries will renege on their debts could trigger a bank run and a major stock sell-off that would mirror what happened after the fall of Lehman Brothers in 2008.
“A restructuring to some could be seen as an easy way out for Greece, and other countries could be tempted to follow,” said George Pagoulatos, an economist at the University of Athens and a former economic adviser to the Greek government. “But one can doubt the economic effectiveness of these measures in terms of their impact on growth.”
He said that trying to wring too much new money out of an economy already in deep recession could ultimately prove counterproductive – if the goal is to get Greece back on its feet.
Underscoring what is at stake, Germany cut its 2012 growth forecasts by almost half on Thursday, from 1.8 percent to 1 percent. Europe’s largest economy has also been the biggest financial backer of the bailouts. But analysts worry that Europe could be stretched thin if Germany starts struggling and several bigger countries need assistance.
In Athens on Thursday, a second day of protests turned violent, with small groups of agitators throwing fire bombs and stones among the mostly peaceful crowds, wire services reported. One protester died after suffering a heart attack, and dozens were injured in clashes with each other, the reports said. Clouds of tear gas mixed with smoke rising from trash piles that had been set on fire on the large square in front of the parliament building.