? Markets rise as plan makes Athens default less likely
? Two-day strike starts on Tuesday ahead of key vote
A silver lining appeared amid the clouds of Europe's financial crisis on Monday as French banks agreed to roll over Greece's debt, two days before a crucial vote in the Greek parliament on austerity measures ? a precondition of further aid from the European Union and International Monetary Fund.
As the government, desperately tried to woo dissident deputies before the vote on the radical ?28bn (�25bn) package, the French president, Nicolas Sarkozy, said that his country's banks had agreed on a plan to reinvest a significant amount of their holdings in Greek debt.
By reinvesting in new securities over 30 years it is hoped the pressure on Greece to repay investors will ease. Holding ?15bn of Greece's ?355bn of debt, they are more exposed than any other eurozone country. The announcement of the scheme helped dissipate fears Greece was heading for default. The FTSE 100 rose 24.62 points to close at 5722.34, while the Dow Jones was up 108.98 points, or 0.9%, to close at 12,043.56.
But in Athens the mood was less sanguine. The vote ? over policies seen as vital if Greece is to receive a fifth loan instalment of ?12bn and stave off economic collapse ? takes place in an increasingly tense atmosphere. Following a year of savage wage and pension cuts, the reaction to the new round of belt-tightening has been as biting as the measures themselves.
Three out of four Greeks oppose the policies, which call for as many as 150,000 jobs to be axed in the public sector at a time when the economy is in deep recession and unemployment is at a record 16.2%.
In a step not seen since the return of democracy in 1974, unions announced a 48-hour strike to coincide with what is expected to be a raucous debate in parliament over the cuts. The walk-out, which begins on Tuesday, is expected to paralyse the country at the height of the tourist season.
On Monday, as the 300-seat parliament prepared for the vote, communist militants stormed the Acropolis, unfurling protest banners from the ramparts. As holidaymakers ascended the hill to the fifth-century BC site, they were greeted by the slogan: "The peoples have the power and never surrender. Organise. Counterattack."
The extent of hostility to the four-year austerity plan, which includes tax increases on everything from property to soft drinks, and loss-making public utilities being privatised at a rate of one every 15 days, appears to have unnerved the socialist government. Prime minister George Papandreou's majority has been whittled down after a series of defections.
Buoyed by the news from France, Papandreou appealed to parliamentarians "to vote for survival, growth, justice, and a future for the citizens of this country," He added that he hoped the terms of a second bailout would be better than the first, which was agreed last year.
"I call on Europe, for its part, to give Greece the time and the terms it needs to really pay off its debt, without strangling growth, and without strangling its citizens," he said.
Papandreou's new finance minister, Evangelos Venizelos, said the government acknowledged the new cuts were "unfair." He said Greece wants to conclude negotiations for a second bailout by the end of the summer "at the latest," and he urged opposition parties to abandon their opposition to the austerity program.
"These measures will take us from running budget deficits to achieving primary surpluses. It's a difficult but necessary step," Venizelos said.
Public opposition to the measures ? with tens of thousands of protesters massing outside parliament over the past month ? is clearly affecting MPs' mindsets.
With at least three MPs from the governing Pasok party voicing grave misgivings, passage of the vote appeared far from assured despite the finance minister making last-minute appeals.
Kostas Panagopoulos, a political analyst, said: "Papandreou may have won a vote of confidence last week, but it will mean nothing if he gets these measures passed with only the slimmest of majorities.
The number of those supporting the measures is critical for the country's political stability. It would seem that this is a government that has clearly lost its connection with society."
The steadfast refusal of the main opposition conservative party to endorse the measures ? citing recession-inducing tax increases ? has added to the government's woes.
Barely a year after it received ?110bn in emergency loans, Greece has been told in no uncertain terms that it will not qualify for a second bailout unless it implements the reforms.
"Not since the early 1960s has Greece been in such crisis," said Fotis Kouvelis, who heads a small leftist party. "Greece's debt load has to be restructured. Our country is at risk of social disintegration. The [austerity] demands being asked of Greeks are too severe at a time when 25% are now living under the poverty line."
Source: http://www.guardian.co.uk/business/2011/jun/27/greece-hope-french-banks-agree-debt-rollover
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