Athens burns as Parliament votes to avert default

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Riots tore through the Greek capital as Parliament voted on harsh new austerity measures today. Though Prime Minister Lucas Papademos acknowledged the bill - which would sharply lower the minimum wage, cut pensions and force one-fifth of all civil servants into early retirement - will cause suffering among the Greek people, he asserted that not passing the bill would lead to default, disaster and expulsion from the euro.

"The social costs that come with these measures are contained in comparison to the economic and social catastrophe that will follow if we don't adopt them," he said in a public interview, according to Bloomberg .

Even the Greek government, however, couldn't seem to form a unified front on the austerity issue. The ruling coalition of Socialists and right-wing New Democrats threw 43 lawmakers out of their respective groups after they dissented against the bill, reported the Associated Press .

Greece's problems remain intractable. The Mediterranean nation's government owes far more to banks, mostly in Germany, France and the U.K., than it can possibly hope to repay on its own. In order to get a $170 billion "rescue package" to pay the bonds coming due next month, the International Monetary Fund and a coalition of European states have required the country to sharply cut government spending.

If Greece didn't get the money and defaulted on its bonds, it would effectively be kicked out of the euro. No one knows exactly how that scenario would play out, though massive capital flight would be likely - whatever currency regime the country created in the wake of default would be worth far less than the common currency, instantly impoverishing the Greeks even further.

The protesters know they're in a tough spot no matter what happens. "The message to the Greek government is they should leave the country, right now," Dimitris Fokos, an unemployed protester, told Bloomberg. "They don't represent the people anymore."

Part of the reason that Greeks are so angry about the debt crisis is the fact that it came as something of a surprise. Shoddy government bookkeeping and fraud concealed the extent of the problem, and it was only during a change of government that the totality of the mismanagement came to light. Set against the backdrop of the financial crisis, which radiated out from the world's centers of finance capital in New York and London, the pain appears to many Greeks to be inflicted on them from the outside.

This sense of injustice explains why as many as 15,000 Athenians rioted in front of Parliament, setting 10 buildings alight and hurling marble and fire-bombs at the police guarding the government.

Perhaps worst of all, it's not clear that austerity is very effective at achieving its stated goals. Though it will cut down on government balance sheets, other countries that have tried austerity have seen little positive impact. Ireland and the U.K. still face significant fiscal challenges, and their people grow ever more restless.

Indeed, the only sure impacts of austerity are the temporary assuagement of international financiers and the permanent provocation of the nation's people.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: News Headlines , Bonds

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