Three dead in Athens riots as Greek crisis sees euro plummet

Rioters in Greece have put a torch to the European Union's hopes of containing the worst crisis in its history. As the German chancellor openly admitted that the very future of the Union is at stake, stock markets across Europe plunged and the euro fell to new lows against the dollar. Like the anarchists and communists throwing Molotov cocktails in the streets of the Greek capital, investors voted with their feet and took their own form of direct action, dumping European stocks and the single currency itself.

Three people died when a bank went up in flames from a petrol bomb thrown by protesters, as more than 100,000 Greeks took to the streets in Athens and elsewhere to protest against the savage spending cuts and tax rises that have been agreed with the IMF and eurozone states.

"Everyone has the right to protest," the prime minister, George Papandreou, told parliament. "But no one has the right to violence and especially violence that leads to the death of our compatriots."

Despite Mr Papandreou's tough words and his assurances that he can bring the Greek economy into line, it was clear yesterday that the authorities were not in control of Athens – the parliament building itself came under siege. The bodies of the three people who died were found in the wreckage of a Marfin Bank branch, on the route of the march in the city centre. Thick black smoke and shouts of "Thieves! Thieves!" filled the air.

Olli Rehn, the European Commissioner for Economic and Monetary Affairs, warned: "It's absolutely essential to contain the bushfire in Greece so that it will not become a forest fire and a threat to financial stability for the European Union and its economy as a whole."

Berlin, too, is feeling the heat. "This is about nothing less than the future of Europe – and with it the future of Germany in Europe. We are at a fork in the road," Chancellor Merkel declared in an impassioned plea to the Bundestag to approve the Greek rescue package.

The Finnish finance minister, Jyrki Katainen, spoke for many colleagues when he declared: "Our economies are so linked that a risk that problems spread from a country to another is very high." The European Commission predicts a drop of 3 per cent in Greek GDP next year, a dramatic fall.

Demonstrators attempted to break through a riot police cordon guarding parliament, and chased the ceremonial guards away from the Tomb of the Unknown Soldier in front of the building. Mr Papandreou said on Sunday that Greek public workers would have to accept cuts in salaries and pensions and that VAT would rise again.

It has enraged the population, already violently resentful. Thessaloniki and other centres also saw protests, and workers staged a 24-hour general strike that grounded all flights to and from Greece, shut down ports, schools and government services and left hospitals working with emergency staff only. The Acropolis and all other ancient sites were closed, and even journalists suspended television and radio news broadcasts.

The fear among investors is that the violence might lead to political failure and the unravelling of the financial deal to save Greece from bankruptcy. Should Greece default on her debt – inevitable unless she receives extensive funding from the IMF and Germany – the "contagion" that has so far been kept under control would engulf the other weak members of the eurozone. Portugal is widely thought to be the next candidate for speculative attack. Yesterday, Moody's credit rating agency did not help matters by putting the highly indebted country on review for a "very likely" downgrade.

When that happened, the euro promptly fell to a fresh one-year low against the American dollar and the FTSE-100 index of leading shares in London slumped by almost two per cent. Stock markets across Europe were similarly shocked at the speed with which confidence in the weaker eurozone members is evaporating. Greece alone will cost €110bn (£94bn) to support over the next three years, and Germany is expected to contribute €22.3bn and France €16.3bn.

Not even the resources of Germany, and possibly the IMF, would be able to rescue a succession of states that followed Greece towards bankruptcy, including Portugal, Ireland, Spain and Italy. And political resistance in Germany to such commitments, were they ever to be contemplated, might prevent future efforts to stabilise the eurozone. In that circumstance, the break-up of the single-currency area, barely a decade after its foundation, becomes a very real possibility.

The consequences of a widespread devaluation of European government bonds would be far-reaching, echoing the original credit crunch and the collapse of the financial system during 2007 to 2008. Such a further constriction of credit and banking failures would come at a time when few governments would be able to issue more government debt to pay for further bailouts. The parallels with the earlier subprime crisis and financial meltdown are painfully obvious to many.

Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Austen Lloyd: Commercial Property Solicitor - Exeter

Excellent Salary: Austen Lloyd: EXETER - A great new opportunity with real pot...

Austen Lloyd: Senior Private Client Solicitor - Exeter

Excellent Salary: Austen Lloyd: EXETER - An outstanding senior opportunity for...

Sauce Recruitment: Retail Planning Manager - Home Entertainment UK

salary equal to £40K pro-rata: Sauce Recruitment: Are you available to start a...

Ashdown Group: Front-End Developer - London - up to £40,000

£35000 - £40000 per annum: Ashdown Group: Creative Front-End Developer - Claph...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower