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Austerity budget approved, but Greece has more to do

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Austerity budget approved, but Greece has more to do
People take to the streets of Athens and rise up against proposed austerity measures being debated in the Greek Parliament on February 12, 2012. Historic buildings were set on fire during the protests against at bailout to save Greece from bankruptcy. UPI/Giorgos Moutafis | License Photo

ATHENS, Greece, Feb. 13 (UPI) -- Finance leaders in Europe say Greece has more to do to secure an international bailout loan that would stave off default when bonds mature in late March.

Athens passed an austerity budget measure Sunday, but "there is no cause for major relief" quite yet, Commerzbank analysts said in a research note Monday.

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"We took a step in the right direction, but are still far from the goal," German Economics Minister Phillipp Rosler said.

Beside securing a deal with private bondholders to lower the value of their holdings by 50 percent, the European Union expects a letter of intent to support the new austerity budget regardless of the outcome of the next national election, The Wall Street Journal reported.

GALLERY: Greek protests against austerity measures

After long negotiations to seal the current deal, the so-called troika -- the European Union, the International Monetary Fund and the European Central Bank -- do not want to loan Greece billions of dollars only to have the unpopular deal sabotaged by a national vote.

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Early Monday, street battles between police and protesters left Athens in flames as Parliament approved the harsh measures to take them a step closer to securing the $173 billion bailout.

The package passed by a 199-74 vote, with 27 lawmakers not voting.

After the vote, Greece's coalition government expelled 43 deputies from its ranks for voting against the cuts.

The Parliament also gave Prime Minister Lucas Papademos' interim coalition government authority to sign a new loan agreement with the foreign lenders and to approve a broader arrangement to reduce the amount Greece must repay to its private bondholders.

The approved new austerity measures include a 22 percent cut in the benchmark minimum wage and 150,000 government layoffs, or 20 percent of all public-sector jobs, by 2015, even though the Constitution protects state workers from being fired.

The measures also include slashes in entitlement spending. Greece is already seized by 21 percent unemployment and a contracting economy.

In the debate Sunday night before the post-midnight vote, under heavy guard from riot police, Papademos appealed to lawmakers to do their "patriotic duty" and pass the measures.

He said their "yes" vote would save Greece from bankruptcy next month, when a $19 billion bond issue comes due that Greece cannot repay without foreign help.

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Economists and politicians have said a Greek bankruptcy would have disastrous effects, spreading like a contagious disease to Portugal, Italy and possibly other countries.

Eurozone leaders plan to meet Wednesday to decide whether to give Greece the bailout. The finance ministers told Athens Thursday it still had to come up with an additional $432 million in spending cuts, on top of the $4.4 billion it offered, by Wednesday or it won't get the bailout.

When they meet they are also expected to raise the stakes on the deal, insisting Greece's bailout money be put in escrow, and be used first to pay creditors, so the Greek government cannot tap it for any other purpose, The New York Times reported Monday.

Many Greeks said the escrow idea represented a fundamental loss of sovereignty and would add to its crippling misery simply to appease banks, the Times said.

In the streets of Athens Sunday, more than 80,000 people turned out to protest the bailout measure, throwing rocks at 4,000 police, who fired back with tear gas.

After nightfall, demonstrators threw Molotov cocktails, setting fire to more than 40 buildings, including a historic movie theater in downtown Athens, the worst damage in the city since May 2010, when three people were killed when protesters firebombed a bank.

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At least four dozen people in Athens were injured, police said.

There were also clashes in Greece's second-largest city, Thessaloniki, in the north; the port city of Patras in the west; the coastal port city of Volos midway on the Greek mainland, and on the popular tourist islands of Crete and Corfu, public broadcasting New Hellenic Television, or NET, reported.

As riots raged outside and tear gas seeped into the Parliament building, Papademos told lawmakers, "Vandalism and destruction have no place in a democracy and will not be tolerated."

A Communist Party lawmaker hurled the thick bailout bill toward the dais, The Washington Post reported.

Papademos planned to reshuffle his Cabinet Monday, following the resignation of six Cabinet members in protest over the new austerity measures, NET said.

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