Europe

Greece bailout: Cabinet approves draft bill on cuts

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Media captionMany Greeks think Europe is dictating totally unacceptable terms

Greece's cabinet has approved fresh austerity measures demanded by the eurozone and IMF in return for a 130bn-euro ($170bn; £110bn) bailout.

The draft bill must now be passed by the Greek parliament and approved by European finance ministers.

Five ministers have resigned from the government over the issue, with one junior party in the coalition saying the demands were "humiliating".

Unions began a 48-hour strike on Friday with protesters clashing with police.

Prime Minister Lucas Papademos has warned the country faces "uncontrolled economic chaos" if it fails to agree spending cuts and defaults on its debts.

"We cannot allow Greece to go bankrupt," he told his cabinet, saying it was an "hour of historic responsibility".

"A disorderly default would plunge our country in a disastrous adventure," he said.

'Tragic ramifications'

Ministers who disagreed with austerity measures could not stay in the coalition government, the Greek leader added.

Meanwhile, Greek conservative leader Antonis Samaras has said all his party's MPs must vote in favour of the bailout law.

Mr Samaras, whose New Democracy party is a member of the governing coalition, said any rebels would face being dropped as parliamentary candidates.

Deputy Foreign Minister Mariliza Xenogiannakopoulou, who quit on Friday afternoon, is the most senior defection so far.

Her Pasok party, the largest in the coalition, also suffered the loss of a deputy labour minister on Thursday.

The cuts package will be put to the vote in parliament on Sunday, with some MPs from the governing parties expected to vote against, the BBC's Mark Lowen in Athens reports.

But analysts say the package should still have enough support in parliament, because Pasok and its other coalition ally New Democracy account for more than 230 deputies out of a total of 300.

The austerity cuts include:

  • 15,000 public-sector job cuts
  • liberalisation of labour laws
  • lowering the minimum wage by 20% from 751 euros a month to 600 euros
  • negotiating a debt write-off with banks.

These were presented to a eurozone ministers in Brussels on Thursday evening.

But they want a further 325m euros in savings for this year and also insist that Greek leaders give "strong political assurances" on the implementation of the packages.

An estimated 17,000 union members and communists took to the streets of Athens on Friday, marching to mark the start of a two-day general strike.

Protesters also gathered near the parliament building.

Athens and EU flag What went wrong in Greece?

What went wrong in Greece?

An old drachma note and a euro note
Greece's economic reforms, which led to it abandoning the drachma as its currency in favour of the euro in 2002, made it easier for the country to borrow money.

What went wrong in Greece?

The opening ceremony at the Athens Olympics
Greece went on a big, debt-funded spending spree, including paying for high-profile projects such as the 2004 Athens Olympics, which went well over its budget.

What went wrong in Greece?

A defunct restaurant for sale in central Athens
The country was hit by the downturn, which meant it had to spend more on benefits and received less in taxes. There were also doubts about the accuracy of its economic statistics.

What went wrong in Greece?

A man with a bag of coins walks past the headquarters of the Bank of Greece
Greece's economic problems meant lenders started charging higher interest rates to lend it money. Widespread tax evasion also hit the government's coffers.

What went wrong in Greece?

Workers in a rally led by the PAME union in Athens on 22 April 2010
There have been demonstrations against the government's austerity measures to deal with its debt, such as cuts to public sector pay and pensions, reduced benefits and increased taxes.

What went wrong in Greece?

Greece's problems have made investors nervous, which has made it more expensive for other European countries such as Portugal to borrow money.
Eurozone leaders are worried that if Greece were to default, and even leave the euro, it would cause a major financial crisis that could spread to much bigger economies such as Italy and Spain.

What went wrong in Greece?

Greek Prime Minister George Papandreou at an EU summit in Brussels on 26 March 2010
In 2010, the EU, IMF and ECB agreed a bailout worth 110bn euros (£92bn; $145bn) for Greece. Prime Minister George Papandreou quit the following year while negotiating its follow-up.

What went wrong in Greece?

Lucas Papademos
Lucas Papademos, who succeeded Mr Papandreou, has negotiated a second bailout of 130bn euros, plus a debt writedown of 107bn euros. The price: increased austerity and eurozone monitoring.

What went wrong in Greece?

Crowds
In May 2012 elections a majority of voters backed parties opposed to austerity, but no group won an overall majority resulting in political deadlock. Fresh elections have been called in June.
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Some demonstrators threw stones and petrol bombs at police, who responded by firing tear gas. A small number of people from both sides suffered minor injuries.

Efi Daridi, a teacher and union member who was protesting, said the results of further cuts would be "tragic".

"In schools we didn't have books up to the middle of the school year and not only that - we have children that do not really care about the lessons, because of all the problems at home.

"The ramifications in the whole society are immense," she told the BBC.

The country is already reeling from the effects of an earlier round of austerity that followed a previous bailout - it is deep in recession, with unemployment rising above 20%.