The Greek parliament has granted the wish of international creditors and passed a further set of harsh austerity measures, much to the dismay of protesters who took to the streets in a second day of demonstrations.
Greece's new austerity package has sparked more unrest
Greece was in the grips of violent protests Thursday as the country's international creditors forced a second parliamentary vote on further harsh austerity measures. The World Bank said the crisis could still spread.
Sections of the Greek capital, Athens, witnessed violent clashes Thursday as some 35,000 demonstrators took to the streets to protest a new austerity package that passed a second parliamentary vote at the behest of Greece's international creditors.
Police reportedly fired tear gas at hooded youths near Athens' central Syntagma Square after the assailants began attacking demonstrating unionists. Combatants wielding batons donned motorcycle helmets and attacked each other.
The violence marks the second day of unrest in the city. At least 45 people were injured after protesters clashed with riot police on Wednesday, with stores, banks and hotels vandalized and cars torched.
Workers of all kinds walked off the job in the nationwide strike
Trade union members began a 48-hour nationwide strike Wednesday, with workers of all stripes - including doctors, taxi drivers, teachers, bank staff and dock workers - walking off the job in response to the Greek government's latest austerity drive.
The new package includes new tax hikes, further pension and salary cuts, the suspension on reduced pay of 30,000 public servants and the suspension of collective labor contracts.
Greece's creditors - the so-called troika consisting of the European Central Bank, the International Monetary Fund (IMF) and the European Commission - made the approval of the austerity measures a condition for Greece to receive its next tranche of aid money.
The grouping recommended Thursday that Greece receive the next payment, according to a draft report obtained by news agency Reuters, but added it was "extremely worrying" that the country's economic downturn was much steeper than had been anticipated.
European powers at stalemate
The second day of violence in the capital comes as French President Nicolas Sarkozy and German Chancellor Angela Merkel were at loggerheads over how to expand Europe's bailout fund to pull economies like Greece back from the brink of default.
It was hoped that the two could reach an agreement by a European leaders' summit on Sunday, which aims to discuss ways to leverage the European Financial Stability Facility (EFSF) in order to stretch its resources well beyond the current 400 billion euros ($549 billion).
But that hope will likely remain unfulfilled, as a second meeting has already been scheduled for next week - in anticipation of negotiations that will continue beyond Sunday.
France and Germany don't agree on expanding the EFSF
France wants the EFSF to be turned into a bank so that it could access funding from the European Central Bank (ECB). Both the ECB and Germany, however, are skeptical of the French suggestion.
"You know the French position and we are sticking to it," said French Finance Minister Francois Baroin.
"We think that the best solution is that the fund has a banking license with the central bank, but everyone knows about the reticence of the central bank," he added. "Everyone also knows about the Germans' reticence."
World Bank President Robert Zoellick, meanwhile, said the US protests against Wall Street and similar movements across Europe against big banks and the financial markets reflected an uncertainty about the current state of the economy.
"There's disquiet, an anxiety," Zoellick said while speaking to an audience at the University of Michigan.
Although the problems right now remain largely centered in heavily indebted Western countries, Zoellick expressed concern that the crisis could spread to the developing countries that are now driving global growth.
"What I'm most worried about are problems in the developed world that will drag down the developing world and developed world," he said.
Author: Darren Mara, Spencer Kimball, Matt Zuvela (AP, Reuters)
Editor: Mark Hallam