Greek lawmakers endorse austerity despite violence (Reuters)

ATHENS (Reuters) – Greece's parliament approved deeply unpopular austerity measures despite worsening street violence on Wednesday, in a vote vital to secure international aid and prevent the euro zone's first sovereign debt default.

Lawmakers passed a five-year package of spending cuts, tax rises and state asset sales by a comfortable margin of 155 votes to 138 in a roll-call vote, handing a victory to embattled Prime Minister George Papandreou.

"We must avoid the country's collapse at all costs. Now is not the time to step back," the Socialist premier told lawmakers just before the vote.

The solid margin suggested the government should be able to push through laws implementing specific budget measures and asset sales on Thursday, clearing the last obstacle to obtaining 12 billion euros ($17.3 billion) of emergency loans.

But with the country on the brink of bankruptcy and social unrest mounting, it is unclear whether the government can stick to the tight schedule imposed by the European Union and the International Monetary Fund to implement the austerity steps, even if it wins all this week's parliamentary votes.

The full pain of pay and benefit cuts and sharp tax increases has yet to be felt, and public anger is boiling.

Outside parliament, there were clashes between stone-throwing masked youths and riot police, who fired clouds of teargas from behind steel crash barriers to keep rioters at bay.

One group of anarchists armed with staves and iron bars attacked finance ministry offices just off Syntagma Square, smashing windows at the entrance and on higher floors. A post office on the ground floor of the ministry building was set on fire, sending acrid grey smoke billowing into the sky.

In cat-and-mouse clashes with police, rioters erected makeshift barricades with benches, chairs and garbage bins on the fringes of the square, where thousands of peaceful protesters demonstrated against the austerity plan.

Chancellor Angela Merkel of Germany, Europe's reluctant paymaster and the main contributor to the bailout of Greece, was quick to praise the "brave" vote. But Finance Minister Wolfgang Schaeuble stressed the importance of "implementing these (measures) with resolve in the coming weeks, months and years."

The presidents of the European Council and the European Commission, Herman van Rompuy and Jose Manuel Barroso, said in a joint statement that Greece had taken "a vital step back -- from the very grave scenario of default."

However, many economists and investors still expect Greece to default in the medium term because its 340 billion euro pile of sovereign debt is so huge, about 150 percent of the country's annual economic output. A senior German ruling coalition politician, Free Democratic floor leader Rainer Bruederle, said on Wednesday that a debt restructuring was inevitable.

Expectations for a positive vote and progress in talks between banks and euro zone governments on a rollover of privately held Greek debt lifted the euro and global stocks on Wednesday. Prices of bonds issued by the zone's weaker states rose.

But markets then fell back slightly after news of parliament's decision.

"This is logical and may continue over the next couple of hours and days as markets will quickly realize that this is only a first step on the road to recovery," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.

"We still expect a hot, nervous and volatile summer."

ROLLOVER

Despite a threat by trade unions staging a 48-hour general strike to prevent lawmakers entering the colonnaded parliament building, deputies were able to reach the chamber. Strikes and sporadic violence have not blown the government off course so far, but its approval rating has plunged in recent months.

Only one deputy in the ruling PASOK party voted against the plan and was immediately expelled from the party by Papandreou. At least one opposition deputy broke ranks with the main conservative New Democracy party and voted "yes."

PASOK now holds 154 seats in the 300-member chamber and it was helped on Wednesday by the abstention of a small center-right splinter group of five deputies led by former foreign minister Dora Bakoyanis.

The EU and the IMF have insisted Greece must adopt the austerity plan, which seeks to save the government 28 billion euros, in order to receive its next slice of aid. Without the money, Athens would run out of cash within weeks.

In May last year Greece signed a 110 billion euro bailout deal with the EU and the IMF, which later jumped in to keep Ireland and Portugal afloat as the euro zone reeled from high government debt in the wake of the global financial crisis.

If Greece's fiscal legislation passes on Thursday, euro zone finance ministers meeting in Brussels on Sunday are expected to agree to release their part of the next aid tranche, with the IMF following on July 5.

Attention will then switch to putting together a second and longer-term rescue package for Greece of about the same magnitude as the initial 110 billion euro bailout.

The new program would involve some 30 billion euros in private-sector participation via a "voluntary" rollover of maturing debt, a similar sum from Greek privatization revenues, and an expected 55 billion euros in new official funding.

Banking sources said politicians and commercial bankers were confident that credit rating agencies would accept a French proposal for a voluntary private sector rollover of Greek debt without triggering a default or a payout of credit insurance.

The agencies have made no public comment on the plan, details of which are still under negotiation.

Euro zone banks and insurers are considering a scheme under which private bondholders would reinvest half of the proceeds of maturing Greek debt in new 30-year bonds paying 5.5 percent interest plus a bonus linked to Greece's economic growth rate.

Of the other half, 30 percent would be paid back to investors in cash and 20 percent invested in a "guarantee fund" of zero-coupon AAA securities with deferred interest that might be issued by the euro zone's bailout fund, officials and banking sources said.

In addition to the rating agencies, the rollover scheme will need the approval of the European Central Bank, and ECB policymaker Juergen Stark rejected on Wednesday any scheme that involved EU guarantees of bonds, saying it would breach European treaty rules.

Asked about a scenario in which banks would exchange their Greek bonds for new paper guaranteed by EU states -- an approach similar to the "Brady bonds" used in Latin America in 1989 -- he said: "This instrument is disqualified.

French banks had the largest exposure to the Greek economy, both the public and private sectors, at the end of 2010 with over $56 billion, data from the Bank for International Settlements shows. The next most exposed country is Germany.

(Additional reporting by George Georgiopoulos, Daniel Flynn and James Mackenzie in Athens, Philipp Halstrick and Ed Taylor in Frankfurt, Stephen Brown in Berlin, and Atul Prakash and Jeremy Gaunt in London; writing by Paul Taylor; editing by Janet McBride and Andrew Torchia)

NAC clears drafts of Food Security, Communal Violence Bills - The Hindu

NAC clears drafts of Food Security, Communal Violence Bills

Smita Gupta Debate on retaining group definition of minorities in draft

NAC agrees to 49 amendments

Endorses main features of original draft

NEW DELHI: At the end of its first year, the Sonia Gandhi-led National Advisory Council (NAC) on Wednesday cleared the drafts of two landmark laws — one that promises food security for 90 percent of rural households, and 50 percent of urban households, and the other that will ensure justice for minorities of all categories when they become victims of targeted, mass violence. The two drafts will now be sent to the government.

The Communal Violence (CV) Bill generated a lengthy debate on whether the group definition of minorities should remain in the draft — and the verdict was in the affirmative.

“While everybody felt that the intellectually and morally correct position was to centre the bill on the minorities because of the institutional bias against them,” Council sources told The Hindu, “some members pointed out that it was a politically volatile issue, and retaining the word may make it difficult to get it past the political right in Parliament.” But in the end, these sources said, Ms. Gandhi herself said it was the right thing to do — so the word minorities stays, even though the NAC anticipates a big battle ahead.

Farah Naqvi, who headed the Working Group (WG) on the CV Bill, apprised the NAC on the suggestions received from citizens, citizen groups and government, and the end of the discussion, the NAC agreed to 49 amendments based on the feedback, even while endorsing the principal features of the original draft.

Most of the amendments emanate from the critique by civil society groups (some of whose members had originally been on drafting and advisory committees of the NAC's WG) of the draft that had been posted on the NAC website. Topping this list is the decision to delete a clause, which refers to Article 355 of the Constitution, as this mistakenly created a fear that it may interfere with the federal structure. Two, the definition of communal and targeted violence had included a reference to ‘destruction of the secular fabric' — it was agreed that this was too high a threshold, and therefore this phrase will be deleted. Concerns about excessive powers to the National Authority have also been addressed.

Food Bill legally vetted

The draft Food Security bill, prepared by the WG, headed by Harsh Mander, has been legally vetted by Additional Solicitor General Indira Jaising.

The NAC has not changed any of the recommendations made by the WG: an innovative element in it is its recommendation to have independent grievance redressal officers at the district level to be recruited by the Union Public Service Commission, who could be from the corporate sector, the media, academia, those who could be a counterpoint to the Collector of the district. Lest they develop vested interests, it would only be for five years.

At the Centre and in the States, there will be appellate authorities, the National and State Commissions — and in case, there is a grievance that cannot be sorted out at the State level, it will come to the National Commission: the States might find this tough to accept, but Council sources said the key to the success of the food security project would be enforcing a system of accountability.

Members who attended Wednesday's meeting included Narendra Jadhav, Pramod Tandon, Aruna Roy, Madhav Gadgil, N.C. Saxena, A.K. Shiva Kumar, Deep Joshi, Anu Agha, Farah Naqvi, Harsh Mander and Mirai Chatterjee.