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
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Life and Style
A still from a scene cut from The Interview showing North Korean leader Kim Jong-un's death.
tech
Voices
'That's the legal bit done. Now on to the ceremony!'
voicesThe fight for marriage equality isn't over yet, says Siobhan Fenton
Life and Style
Approaching sale shopping in a smart way means that you’ll get the most out of your money
life + styleSales shopping tips and tricks from the experts
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs General

The Jenrick Group: World Wide PLC Service Engineer

£30000 - £38000 per annum + pesion + holidays: The Jenrick Group: World Wide S...

The Jenrick Group: Project Manager

£35000 per annum + Pension+Bupa: The Jenrick Group: We are recruiting for an e...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

The Jenrick Group: Resident Maintenance Manager

£50000 per annum + pension + holidays: The Jenrick Group: Resident Maintenance...

Day In a Page

Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'