Greek PM seeks EU debt pledge as protests grow

[March 05, 2010]  ATHENS, Greece (AP) -- Greek Prime Minister George Papandreou on Friday launched a diplomatic quest for concrete support from European leaders in fighting off his country's debt crisis, as workers back home shut down hospitals, schools and public transport to protest painful cuts.

Some 3,000 Communist-affiliated union members protested peacefully outside parliament, where lawmakers were debating a new euro4.8 billion ($6.5 billion) austerity package that will hike consumer taxes and slash public sector workers' pay by up to 8 percent.

"Our protests have to be long-lasting and relentless," protest organizer Giorgos Skiadiotis said. "Because the more rights we surrender, the more they want to take away from us."

Greece's two largest unions were planning more demonstrations later Friday.

The center-left government is seeking a total euro16 billion ($21.87 billion) in savings this year, to reduce a bloated budget deficit of some euro30 billion ($41 billion) that is over four times the EU limit as a percentage of annual output.

The cuts are key in convincing bond markets to loan the country money and to win support from the European Union.

Papandreou was heading for a meeting in Luxembourg with Prime Minister Jean-Claude Juncker, head of the group of eurozone finance ministers. Later Friday, he will hold talks in Berlin with German Chancellor Angela Merkel.

Merkel and Germany, as the biggest of the 16 countries that use the euro, would play a key role in any financial lifeline the EU plans to offer Greece. But the German government has said that Friday's meeting is not about giving aid and the EU's promise of support, first issued last month, remains vague.

Despite raising euro5 billion ($6.83 billion) from a successful 10-year bond issue Thursday, Athens remains under intense pressure from high borrowing rates. Papandreou has ruffled Europe's feathers by warning that Greece could request financial help from the International Monetary Fund unless the EU details potential emergency support.

Papandreou insists Greece is not seeking bailout money from the European Union but a public commitment to a financial rescue plan that would reassure markets.

Asked what he wants from Merkel, Papandreou said in an interview published Friday in Germany's daily Frankfurter Allgemeine Zeitung that Greece needed "support ... that there is European support so that we can borrow money under reasonable conditions."

He said that Greece has never asked for a bailout, but lack of support would hurt his reform plans.

"And that would, one way or another, be expensive for all of Europe," Papandreou said. "If the euro retreated, that might help some countries with their exports, but it would for example make importing oil and gas more expensive."

Papandreou will also discuss the debt crisis with French President Nicolas Sarkozy in Paris Sunday, and meet U.S. President Barack Obama on March 9 in Washington.

French Finance Minister Christine Lagarde said Friday that President Nicolas Sarkozy would back Greece if its debt woes got it into real trouble.

While she told LCI television that Sunday's meeting would focus on how the Greek government's new austerity plans will be enacted, she also said she expects Sarkozy will tell Papandreou that France would be there if Greece got into real difficulties. She did not explain what form that support would take.

Friday's strike saw state schools closed, while hospitals functioned with emergency staff and all Athens public transport was idle. An air traffic controllers work stoppage from 1000GMT to 1400GMT canceled dozens of flights, while journalists also walked off the job for a few hours.

"We must wage a long and effective struggle," said Yiannis Panagopoulos, the leader of Greece's largest union, the GSEE. "The (new) measures are one-sided and socially unjust."

Despite almost blanket opposition from conservative and left-wing parties, the governing Socialists hold a strong enough majority to pass the draft law, in a vote later Friday.

Finance Minister George Papaconstantinou said the belt-tightening would work -- if unswervingly enforced.

"In emergencies, governments take emergency measures," he told lawmakers. "Will we succeed? Yes, we will. Will we have to take further measures? No, provided we implement the program we have submitted. And we will."

[Associated Press; By NICHOLAS PAPHITIS]

Associated Press writer Derek Gatopoulos in Athens and AP Business Writer Emma Vandore in Paris contributed to this report.

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