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Originally published Tuesday, May 4, 2010 at 4:16 AM

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General strike hits indebted Greece over new cuts

Flights to and from Greece were grounded, trains and ferries suspended their routes and public services were paralyzed Wednesday as angry Greeks went on strike to protest harsh new spending cuts aimed at saving their country from bankruptcy.

Associated Press Writer

ATHENS, Greece —

Flights to and from Greece were grounded, trains and ferries suspended their routes and public services were paralyzed Wednesday as angry Greeks went on strike to protest harsh new spending cuts aimed at saving their country from bankruptcy.

In Germany, Chancellor Angela Merkel urged parliament to quickly pass the country's share of euro110 billion in bailout loans aimed at keep Greece from defaulting and preventing Athen's debt crisis from becoming a wider crisis for the euro by engulfing other countries with weak finances such as Spain and Portugal.

Skepticism that the plan would accomplish that goal of preventing market contagion sent the euro below $1.30 for the first time in over a year.

More than 20,000 people took to the streets, chanting "Athens, Brussels, listen carefully: this protest will never stop" and marching through central Athens in two demonstrations against the austerity measures Prime Minister George Papandreou announced on Sunday.

The cutbacks were the price of winning help from the International Monetary Fund and the other 15 countries that use the euro. Germany, as Europe's largest economy, will provide euro8.4 billion in 2010 and up to euro14 billion more over 2011 and 2012 according to the plan.

"Nothing less than the future of Europe, and with that the future of Germany in Europe, is at stake," Merkel told lawmakers. "We are at a fork in the road."

Greek unions concede that the cash-strapped government was forced to increase consumer taxes and slash spending, including cutting salaries and pensions for civil servants, to secure a vital euro110 billion ($144 billion) three-year loan package from European partners and the International Monetary Fund.

But they say low-income Greeks will suffer disproportionately from the measures, which aim to save euro30 billion ($40 billion) - the country's current budget deficit - through 2012.

By Greece's usually volatile standards, union reaction so far has been relatively muted although the country has been hit by several strikes so far this year. The opposition conservatives - whom Papandreou's Socialists have blamed for mismanaging the economy and fudging statistics during their five years in power - trail the Socialists by 10 percentage points in recent opinion polls.

But anger could increase as workers see their income slashed.

"These people are losing their rights, they are losing their future," said Yiannis Panagopoulos, head of GSEE, one of the two largest union organizations. "The country cannot surrender without a fight."

Under the package, the other 15 countries will extend loans to Greece with interest rates of about 5 percent - higher than those they face themselves, but far lower than the prohibitive rates of about 10 percent that Greece faces at the moment on the international market.

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Markets have been far from assured that the package will douse Europe's smoldering sovereign debt crisis, which many fear could spread to other financially troubled eurozone countries such as Portugal and Spain.

IMF head Dominique Strauss-Kahn warned that the crisis could spread to other countries despite the rescue package's efforts to contain it.

"Everyone must remain extremely vigilant," to this risk, Strauss-Kahn said in an interview published in French newspaper Le Parisien Wednesday.

He said Greek anger at the harsh spending cuts was understandable.

"I completely understand the Greek populations' anger, its incomprehension at the size of the economic catastrophe," Strauss-Kahn said. But Greeks must also understand that without these measures, "the situation would be infinitely more serious," he said.

Greece's 24-hour general strike shut down schools and customs offices and left hospitals working with emergency medical staff. The Acropolis and all other ancient sites were closed, while journalists also walked off the job, suspending television and radio news broadcasts.

"We'll be on the streets every day, every day! You never win unless you fight," said 76-year-old Constantinos Doganis, who gets euro345 a month from his farming pension fund.

"It's our fault too, all the mistakes made by politicians over 30 years, all the people who cheat on their taxes," he said. "But they are behaving like buzzards - the Germans borrow money at 3 percent and then lend it to us for 5. Why?"

Discontent has intensified, as civil servants and pensioners face deep income cuts and consumer taxes have been increased again.

"These measures are one-sided and unfair. We understand the difficult financial situation but we are obliged to demonstrate because they are cutting our pay," said Giorgos Vassilopoulos, head of Greek Postal Workers Union, as he headed towards the pre-demonstration rally. "Some of us are losing 20 percent of our salaries. They plan needs to change, to promote growth as a way of repairing the economy - otherwise we'll be trapped in recession."

Despite the strike, the draft bill of the new austerity measures were to be discussed at committee level in Parliament Wednesday afternoon, and are to be voted on Thursday. Prime Minister George Papandreou's Socialists hold a comfortable majority of 160 in the 300-seat Parliament, and with a simple majority of 151 votes needed, the bill is expected to be passed easily.

---

Associated Press writers Elena Becatoros in Athens, Greg Keller in Paris and APTN crews in Athens contributed.

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