Eurozone strugglers reel from riots, strikes and downgrades

ATHENS—Riot police clashed with protesters outside the Greek parliament Wednesday during record demonstrations against government cuts as fellow eurozone struggler Spain reeled from a new ratings downgrade.

Two days ahead of a make-or-break summit in Brussels, the developments underscored the scale of challenges facing leaders as they struggle to slash costs in the face of mounting public anger and try to avoid recession.

While French President Nicolas Sarkozy and German Chancellor Angela Merkel discussed the crisis, the protests served as a shot across the bows of leaders demanding that Athens tighten its belt further in return for more loans.

According to police estimates, more than 120,000 protesters marched in various cities across the country, marking a new record turnout after nearly two years of demonstrations over the crisis.

The biggest turnout was in Athens where some 70,000 people converged on central Syntagma Square, where parliament is located, while other large protests were held in Thessaloniki, Patras and Heraklion, police said.

Police in Athens fired teargas at groups of young protesters outside parliament, after they came under attack with firebombs, an AFP reporter said.

Some 200 youths also attacked a steel barricade erected outside the parliament where lawmakers are to vote on Thursday on a new reform bill.

“Forward people, it’s now or never to throw out the government, the IMF and the EU,” said a banner carried by leftist demonstrators.

“The government must fall now,” said another borne by Communists.

A police motorcycle patrol was pelted with stones in the working-class district of Kaisiariani as the central Athens protests kicked off, and one of the riders was hurt, a police source said.

Some 3,000 officers were stationed around the capital, with additional forces guarding possible targets of violence such as embassies and government buildings.

The protests came on the first day of a 48-hour general strike in Greece.

Unions in Portugal, another country which has had to slash spending to secure vital loans, also announced they would have a general strike on November 24.

Greece secured an agreement last year for a 110-billion-euro ($149-billion) bailout package from the Europe Union and the International Monetary Fund but it has had to convince the lenders that it is implementing stringent spending cuts to qualify for each tranche of cash.

Measures taken so far include a rise in the retirement age and major cuts to civil servants’ salaries. Plans for temporary lay-offs of many public sector workers should also be approved in Thursday’s vote.

European Union leaders will discuss new ways to help out Athens at their summit from Friday and rubber-stamping the release of the next eight billion euro tranche.

They will also look to strengthen the European Financial Stability Facility, which now has 440 billion euros but would need much more if it had to throw a lifeline to Italy or Spain.

Europe’s stock markets and the euro rallied on Wednesday, boosted by a newspaper report that EU leaders were close to massively increasing their bailout fund for troubled eurozone economies.

Citing unnamed European Union diplomats, The Guardian said the eurozone’s two biggest economies, France and Germany, would boost the rescue fund to two trillion euros ($2.7 trillion) from its current 440 billion euros.

Merkel and Sarkozy were due to speak by phone later Wednesday, according to sources in Paris.

London’s FTSE 100 index of top shares leapt 1.02 percent while Frankfurt’s DAX 30 jumped 1.40 percent to 5,959.27 points and in Paris the CAC 40 won 0.89 percent.

However, the downgrade of Spain’s credit rating tempered the mood and highlighted the growing concern among investors that major European economies’ sovereign debts are no longer risk-free.

Moody’s highlighted those strains late Tuesday, slashing Spain’s rating by two notches to A1 from Aa2, with a negative outlook, just days after a similar move from Standard & Poor’s.

Describing a now familiar malaise of slow growth and crushing private and public debt, Moody’s in effect issued a vote of no confidence in Spain and the European Union’s handling of the crisis so far.

“Since placing the ratings under review in late July 2011, no credible resolution of the current sovereign debt crisis has emerged and it will in any event take time for confidence in the area’s political cohesion and growth prospects to be fully restored,” it warned.

On Tuesday, France was also warned that its rating could be cut, leading Sarkozy to warn that “the world and Europe are going through an unprecedented financial crisis.”

“This crisis is going to lead us in the days ahead to take important, very important decisions… Allowing the destruction of the euro would be to take a risk of destroying Europe,” he added in Nice on Tuesday.