Greece Passes Austerity Bill — Now Comes the Hard Part

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Louisa Gouliamaki / AFP / Getty Images

Protestors gather in Syntagma square in front of the Greek parliament in Athens on June 29, 2011, during massive clashes.

Vasso Sarafidou wasn't carrying a gas mask when she walked from her home near the Acropolis to the anti-austerity demonstration outside parliament in Athens on Wednesday. Passing rows of riot police, some not much older than her teenage grandchildren, Sarafidou, 72, said she knew Greek lawmakers were going to pass the bill that would raise taxes and sell some state assets in exchange for more bailout loans. But she thought the bill was a bad idea, and she joined the protest against it.

The tear gas hit her not long before the bill passed with a final vote of 155-138, as police held back angry protesters trying to storm parliament. A young woman sprayed Sarafidou's face with liquid Maalox, the stomach antacid, to keep her eyes from burning. "I suppose this means they want me to go home," she said, shielding her eyes with large sunglasses. "Well, I'm not going."

Wednesday's vote may have eased, at least for now, the worries of European Union leaders in Brussels and the fragile government of Greek Prime Minister George Papandreou — but Greeks remain stubbornly opposed to the implementation of austerity policies in exchange for bailout loans. Greece was set to run out of cash next month without the latest installment of some $17 billion of loans from the EU and the International Monetary Fund (IMF). The EU and the IMF said that the new austerity plan had to pass for Greece to get the cash infusion. Athens is bracing for more demonstrations on Thursday, when parliament takes up a vote on how to implement the new austerity measures.

Though leaders in Brussels greeted Wednesday's vote with relief — European Parliament President Jerzy Buzek praised it as "a turning point for Greece and the euro zone" — big challenges remain. Privately, many economists say Greece's default is inevitable, since its debt is rising and its antiquated, almost Soviet-style economy has few sources of growth. If Greece defaults, Europeans fear that the debt crisis will spread to other indebted countries such as Ireland and Portugal, who are also seeking bailouts, and vulnerable economies such as Spain and Italy.

"The vote itself — albeit important for dealing with pressing issues like the Greek government running out of cash — is less critical than the long-term response," says Fredrik Erixon, director of the European Centre for International Political Economy, a Brussels-based think tank. "Everyone understands Greece will have to default, and until we work out how to do this, there will be new crises erupting time and time again."

The challenge for Papandreou's government is even more immense. It must implement the unpopular austerity package while also convincing an angry Greek public that this is the right way to dig the country out of more than $450 billion in debt. At the same time, it must deal with the worst recession since the 1970s. Unemployment is at more than 16%, and is almost three times that rate for young Greeks. "Greek society may have reached a breaking point," says Ian Lesser, a Senior Transatlantic Fellow at the German Marshall Fund.

Polls show that Greeks are skeptical that more public-spending cuts and tax hikes will solve the debt problem, since the country's public debt is forecast, in the most optimistic scenario, to rise to about 140% of GDP by 2015. But Dimitris Katsikas, a research fellow with the Hellenic Institute of European and Foreign Policy in Athens, says the government could still win people over if it tackles tough reforms, such as reducing Greece's bloated public sector — and shows results. Such results could also move skeptical Europeans, Katsikas says, who are currently discussing a second bailout for Greece that could total $150 billion.

"If the Europeans move quickly and a second bailout is agreed, then I think we'll see tension recede over the next couple of months," Katsikas says. "If the [Greek] government fulfills its tasks, then this calm might last a little longer as its own MPs will be able to respond to angry constituents by pointing to achievements."

Unless it wins over hearts and minds — and does it soon — Papandreou's government could fall if deputies in the ruling Socialist PASOK party defect. That means snap elections before 2013, when PASOK's term ends. But even then, Greece would likely end up with a coalition government, since the public also has little faith in the center-right New Democracy party, the main opposition. Smaller parties, such as the Communist Party of Greece and the right-wing Popular Orthodox Rally, have also picked up little new support from Greeks, who dismiss most politicians as thieves. Yiota Valaoura, a 52-year-old worker at a weapons factory, says the Greek Orthodox Church would do a better job legislating than those in parliament. "We don't take anyone in that building seriously," says Valaoura, who drove three hours from her home in Aegion, a city in the Peloponnese, to get to Wednesday's demonstration outside parliament.

Many of the protesters made their distaste clear by throwing yogurt at lawmakers arriving for the vote. The more militant threw rocks, chunks of marble and petrol bombs at riot police, who responded with volleys of tear gas. The now-familiar stench of burning gas cloaked Syntagma, the square across the street from parliament.

Clashes between police and fringe anarchist and far-left protesters continued into the evening. The Red Cross reported that at least 500 people have been treated for injuries or breathing problems and more than 30 were sent to the hospital. Police also reported that 31 officers were hurt in the days violence. Greek media, meanwhile, reported that the police response around the square was especially brutal. Motorcycle police chased protesters fleeing on foot, and also attacked journalists. Italian photojournalist Gabriele Micalizzi told TIME that he received five stitches after police beat him while he was photographing a fight between an anarchist and a police officer.

Before the day devolved into chaos, Vasso Sarafidou, the grandmother from Athens, had stood her ground near Syntagma for hours. She clapped when protesters chanted slogans equating the government to the 1967–1974 military junta. She frowned when the young riot police edged toward the crowd, their shields raised, and when the kids in black threw rocks at them. "I don't know what else to do but to come out here and let my feelings be known," she said, her eyes watering from another dose of tear gas. "I feel like this country is dying, and I'm afraid that our politicians don't know how to save it. So maybe we have to save it. Someone has to save Greece."

With reporting by Leo Cendrowicz/Brussels and Nick Malkoutzis/Athens