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Riot Police On Alert Ahead Of Austerity Vote

(c) Sky News 2012

With the US presidential elections concluded, markets have shifted attention to Europe (Chicago Options: ^REURUSD - news) 's deepening debt crisis, as Greece - the epicentre of the continent's financial woes - prepared to vote for another round of austerity measures.

Faced with the toughest batch of budget cuts yet, crisis-crippled Greeks walked off work for a second day, taking to the streets in a flood of protests as lawmakers prepared for the controversial vote.

From flights to and from the country that were halted for three hours, to schools, shops and government agencies that remained shut, the 48-hour nationwide strike affected both public and private sector, paralysing an already anaemic economy.

Riot police have also been placed on alert as demonstrations are expected to peak in central Athens ahead of the midnight vote. Most anti-austerity protests turn violent.

The 216-page proposed bill includes 11.5bn euros (£9.2bn) of fiscal and structural reforms - the fourth batch of spending cuts to hit Greece since the financial crisis erupted here in late 2009.

While pundits and politicians anticipate the measures to pass, disagreement within the ruling three-party coalition have cast doubts over the outcome of Wednesday's roll call vote.

Failure to rubber-stamp the unpopular slate of measures - including tax hikes, salary and pension cuts, increased retirement ages and contributions - could block international lenders from disbursing a slice of 31bn euros (£24.8bn) in bailout funds to Greece.

That could push the tiny Mediterranean nation of 11 million into bankruptcy, with unforeseen consequences for Europe's single currency and the global financial system.

Prime Minister Antonis Samaras has already warned that Greece only has enough money to pay pensions, salaried and state expenses through to November (Xetra: A0Z24E - news) 16.

Wednesday's parliamentary vote is seen as the biggest test of strength yet for Mr Samaras, scrambling to shore up support and dampen dissent within his shaky coalition.

Mr Samaras needs a majority of 151 votes from the 300-member Greek parliament to pass the controversial bill.

It comes as the European Commission (EC) forecast a 6% decline in Greece’s economic output in 2012.

The EC added that by 2014, total Greek debt will reach 188.9% of GDP – although the country should have exited its seven-year recession, recording 0.6% growth.

Earlier this week though, Democratic Left, Mr Samaras' junior coalition partner, said it would vote against radical labour reforms that slash wages further and wipe out severance fees.

The Socialist Pasok party, also part of the coalition, faced rising dissent in its ranks with at least four lawmakers saying they would vote down the punishing measures.

"Eventually Mr Samara will get his victory," George Kirtsos, a leading political commentator in Athens, said.

"But implementation (of the measures) will be a problem. The government will have been seriously impaired."

With unemployment hovering at 25%, incomes declining by 35% and the country heading into a sixth year of severe recession, the measures have been an impossible sell for the government.

"They can vote for all the austerity they want," Dimitris Iakovou, a state paid electrical engineer said as he marched before parliament on Tuesday.

"But when they turn to us to adopt the measures, we won't. We simply cannot."