Greek prime minister warns of 'uncontrolled chaos' if country defaults

 

By Louise Armitstead 10:30PM GMT 10 Feb 2012

Greece's plans to avert bankruptcy were in chaos on Friday night as politicians, police and protesters formed a powerful and violent opposition to the internationally-imposed austerity measures.

George Karatzaferis, leader of the Greek far right, walked out of the coalition government and said 'Greece cannot be outside the EU. But it can do without the German boot.' Photo: BLOOMBERG

Lucas Papademos, prime minister, struggled to maintain order in parliament ahead of Sunday's crucial vote on the budget plans which he needs to win to secure Greece's €130bn (£109bn) bail-out.

Five ministers resigned in protest over the budget plans, which include tough spending and pension cuts, that were approved on Thursday by political leaders.

Late on Friday night, the remaining memebers of the cabinet approved the draft bill of austerity measures which the country's parliament will vote on on Sunday.

Earlier in the day, George Karatzaferis, leader of Greek far right in coalition, walked out of the national unity government saying he would refuse to vote on Sunday. Although his party cannot block the vote, his stance rattled European markets.

"Humiliation was imposed on us. I will not tolerate this... no matter how hungry I might be," he said. "Greece must not and cannot be outside the EU. But it can do without the German boot."

 

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In Germany, the Dax closed down 1.6pc; France's CAC fell 1.3pc; and in London the FTSE 100 slid 0.8pc.

As demonstrators taking part in Greece's two-day general strike turned to violence, the powerful police union released a statement saying its members refused to "stand against our parents, our brothers, our children or any citizen who protests".

The union threatened to arrest members of the troika – officials from the European Union, the European Central Bank, and the International Monetary Fund (IMF) – for "blackmail, covertly abolishing or eroding democracy and national sovereignty".

Mr Papademos warned of "uncontrolled economic chaos" if Greece defaults.

Jean-Claude Juncker, chairman of the eurogroup which is reviewing the austerity measures, insisted that Greece must ratify the plans. He added that a further €325m of spending reductions need to be identified by Wednesday.

Wolfgang Schäuble, Germany's finance minister, said Greece was likely to miss its debt targets again. He said even current commitments would leave the country's debt-to-GDP ratio at an unacceptably high 136pc by 2020.

Elsewhere in Europe, Standard & Poor's downgraded the credit rating of 34 Italian banks.

 

Greek prime minister warns of 'uncontrolled chaos' if country defaults - Telegraph