Europe warned of financial chaos over Greek debt crisis

Wednesday, June 15, 2011
By Paul Martin

Greek prime minister fails to form unity government as police battle rioters in Athens and shares tumble over default fears

Ian Traynor in Brussels, Helena Smith in Athens
The Guardian.uk
Thursday 16 June 2011

Greece’s 18-month sovereign debt crisis brought the government to the brink of collapse as public fury over savage austerity measures erupted in pitched battles with riot police on the streets of Athens.

The escalation of the Greek crisis had instant European and global impact, sending world stocks tumbling and exposing European Union paralysis over whether and how to launch a second attempt in a year to save Greece from insolvency.

George Papandreou, the socialist prime minister, announced he would seek a vote of confidence on a new government after offering to resign and broker a new national unity coalition with opposition conservatives.

He admitted failure after intense but fruitless negotiations with the conservative New Democracy party aimed at engineering a consensus behind the massive public spending cuts and wholesale privatisation programme – moves deemed necessary to secure a second bailout from the European Union and International Monetary Fund.

The opposition called for Papandreou’s resignation and a renegotiation of the bailout terms with the EU, the European Central Bank, and the IMF as the price for its assent to a national coalition.

Earlier, riot police clashed with tens of thousands of demonstrators protesting in the capital against the radical austerity measures being imposed to try to secure a new bailout expected to amount to around €100bn.

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