Greek riots, political chaos hammer markets

[Guest guest]

http://beta.news.yahoo.com/greek-riots-political-chaos-hammer-markets-212955270.\

html

Greek riots, political chaos hammer markets

By DEREK GATOPOULOS - Associated Press,ELENA BECATOROS - Associated Press | AP –

4 hrs ago

ATHENS, Greece (AP) — Greece's prime minister, struggling to ensure

Parliamentary approval for a crucial austerity bill, said Wednesday he would

reshuffle his Cabinet and seek a vote of confidence for his new government after

coalition talks with opposition parties failed.

The negotiations collapsed as rioters clashed with police in the streets of

Athens during a general strike and renewed fears of default rattled global

markets.

Prime Minister Papandreou has been struggling to contain an internal

party revolt over a new austerity package that is the main condition for

continued funding from a euro110 billion ($155 billion) international bailout.

Without continued funding from the rescue loans, Greece will default on its

massive debts — which would unsettle the global economy and undermine the future

of the eurozone.

Socialist officials said Papandreou had offered to even step down to clinch a

coalition with the opposition conservatives before the talks collapsed, in a

dramatic day that saw Greece's borrowing rates hit new highs and lawmakers

escorted by armed motorcycle guards past protesters into parliament.

Police fired repeated volleys of tear gas to repel rioters hurling firebombs and

ripped-up paving stones as an anti-austerity rally by tens of thousands of

protesters degenerated into violence. A crowd of youths smashed the windows of a

luxury hotel in the square. More than 60 people were injured, including 36

police, as clouds of choking gas wafted through central Athens. Bewildered

tourists struggled through the mayhem, dragging their luggage behind them.

Global stocks were closing sharply lower as the events in Greece — which has the

worst sovereign credit rating in the world — further destabilized markets. Major

indexes had their biggest drop on Wednesday since June 1 and the euro slid more

than 1 percent against the dollar.

Papandreou said he would reshuffle his Cabinet Thursday and called a confidence

vote on the new government, expected Sunday. However, several of his own

deputies publicly oppose the new austerity package, which must pass a

Parliamentary vote this month.

Wednesday's mayhem is likely to be viewed with concern in the other European

countries that are bailing out Greece. European officials have pushed for

cross-party support for the new measures as they extend to 2015, two years

beyond the current government's term in office.

The political maneuvering and violence on the streets of the Greek capital

triggered a sell-off in global financial markets as investors worried that a

default in Greece could hurt banks in other countries in a chain reaction

experts predicted would be catastrophic. Yields on the country's 10-year bonds

reached new record highs, spiraling to 18.4 percent.

Market turmoil has reflected waning confidence that Papandreou could win the

vote in the 300-seat Parliament, where his majority was trimmed to five Tuesday

after one of his deputies rebelled and declared himself an independent. Another

deputy has said he will not support the bill, due to be voted on by the end of

this month.

" The country is facing critical times, " Papandreou said in a televised address

to the nation. " Tomorrow I will form a new government and immediately afterwards

I will ask for a vote of confidence from Parliament. "

The conservative opposition leader, Antonis Samaras, had demanded Papandreou

resign as a condition for his party joining any coalition.

Papandreou said that while he " clarified that my responsibility has no

dependence on official posts, " the way the negotiations were handled was

unacceptable.

" Before the meaningful issues were negotiated, conditions were made public that

could not be accepted, " he said. The conservatives' demands would have kept " the

country in a lingering state of instability and introversion, while the vital

national issue remains dealing with the national debt. "

Furious opposition parties called for elections, and Samaras said a vital

opportunity had been lost.

" The prime minister rejected the only proposal for consensus that could have

lifted the country out of its impasse, and united the Greek people, " Samaras

said.

" A great and historic opportunity was lost and of course Europe will understand

this. "

The question remained whether Papandreou could govern, the opposition leader

said.

" If he can, then he shouldn't have asked for our support, " Samaras said. " If he

can't, then he should hold elections. "

____

Paphitis in Athens contributed.