Greek MPs warned of catastrophe as Athens erupts in violence

Rioters set buildings on fire as highly divisive austerity package is passed by parliament

Violence and looting engulfed central Athens last night as the Greek parliament passed a highly divisive austerity and debt-relief bill, which the government hopes will help save Greece from a disorderly bankruptcy and a potential exit from the eurozone.

Several buildings including a bank, a cinema and a café were set on fire in the worst riots for years, as looters smashed shops and protesters threw petrol bombs amid tear gas fired by police.

Angry demonstrators chanted "thieves, thieves" and heckled representatives outside the legislative assembly, but the mood was also explosive inside as lawmakers fiercely debated the bail out package.

One communist MP hurled the document including the second loan agreement at Finance Minister Evangelos Venizelos, who exhorted lawmakers to approve the bill before markets opened this morning. "You're fooling yourself if you think that you will lead the procedure to an impasse and will punish the troika and the IMF," Venizelos said. "you're only punishing the people and will lead it to a catastrophe."

Greece, lacking the cash to repay €14.4bn bonds on 20 March, needed to pass harsh cuts to secure a €130bn (£109bn) loan that will help keep its economy afloat. Among measures is the reduction of €100bn of Greece's privately held debt.

In the streets of Athens, youths hurled pieces of smashed pavement and petrol bombs while riot police retaliated, firing volleys of tear gas and stun grenades. The large crowds outside Parliament scattered when violence broke out but many reassembled. The street fights spilled into the shopping street of Ermou while policemen chased youths in the area near Parliament. At least 37 protesters were injured, with 20 suspected rioters arrested.

"Greece and corruption anger me, but we need to find another formula to pay back all these loans," said Anastasis Kalaitzis an employee for a US business firm.

"I'm here to oppose this memorandum because it will seal the fate of our children who will live in insecurity and fear," he added, as he held his two-year-old daughter Anastasia in his arms.

Homeless citizen Vagelis Mesitis, his wife and his seven-year-old daughter also attended the rally. His banner read in Greek: "An hour of freedom is better than slavery, poverty, cold and hunger." Mr Mesitis and his family pay €751 every three months to make use of the running water in the warehouse that belongs to the town hall of Aigaleo.

"I represent the future of Greece and people need to know this," he said. "I'm not here for our MPs as they just take orders. But the people of Europe need to know – they'll become like us." Protests were also held in Greece's second largest city of Thessaloniki.

EU leaders, including Germany's Angela Merkel, have been taking a firm line on the latest austerity measures .

Cutting deep: Austerity measures

The austerity measures which are being demanded by international lenders will cut deep into the Greek economy, hitting the earnings and jobs of thousands of ordinary citizens across the debt-laden country.

The measures are attached to the call for 150,000 public sector lay-offs. This is set to lead to an axing of pensions for many public employees and a 22 per cent reduction in the country's minimum wage.

Already, the combination of the financial crisis and the country's debt woes have delivered a body-blow to the economy, with one out of three Greeks now living under the poverty line, according to data from the European statistics office.

The number of unemployed, meanwhile, exceeds one million as Greece struggles to recover. That equates to an eye-watering unemployment rate of nearly 21 per cent. And the deeper that you dig into the figures, the worse it appears. Youth unemployment, for example, stands at 48 per cent.

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