Greece heads for the wire again

BRUSSELS, Belgium — Greece is back in the epicenter of the euro crisis.

The country where it all began risks going bankrupt next week unless its fractious politicians approve a new round of painful budget cuts and labor reforms in time to persuade international creditors to free up $40 billion in bailout money.

Public anger over the proposed cuts has erupted in a new wave of strikes, although the number of demonstrators has been down from previous stoppages.

Unions launched a 48-hour general strike Tuesday to bring the country to a standstill and crank up pressure on parliament before it votes on the $17 billion of cuts on Wednesday. Journalists, doctors, taxi drivers and Athens transport workers stopped work already on Monday.

"Our life will become even more difficult and for millions of people who live below the poverty line, this will be the coup de grace," the power workers’ union GENOP-DEH said on announcing its participation.

Police ringed parliament in Athens to protect it from thousands of protesters.

Despite the outrage, lawmakers are expected to narrowly pass the cuts.

However, fears that a rebellion by discontented left-wingers in the government coalition could sink the proposal pushed the euro to a month-long low against the dollar. They also revived concerns a bankrupt Greece could be forced out of the euro zone — or bring down the entire currency bloc.

That appeared to have been averted for now after Justice Minister Antonis Roupakiotis of the Democratic Left Party eventually signed up to the package Monday. His party is expected to abstain instead of voting against the plan.

That should give Prime Minister Antonis Samaras a majority in Wednesday's vote and a separate parliamentary decision Sunday on the 2012 budget, even if a handful of government lawmakers rebel as expected.

The governing coalition has 175 members in the 300-seat parliament: 127 from Samaras's conservatives, 32 Socialists and 16 from the Democratic Left.

Historically bitter rivals, the conservatives and left-wing parties were forced to come together in defense of Greece's membership of the euro zone after elections earlier this year saw a surge in support for parties on the extreme right and left.

Before the strike shut down Greek media outlets, Samaras insisted the decisions of the coming days would be decisive for Greece's future.

"We have to save the country from catastrophe," he told legislators Sunday. "Leaving the euro would be a nightmare and we intend to avert it… if we do not achieve this, everything else will be meaningless."

Samaras acknowledged that the crisis has wiped out a third of Greeks' income since 2008, but warned that the consequences of a euro exit would be much worse. He said living standards could decline by 80 percent within weeks.

He also promised the latest austerity package — the fourth since the crisis began — would be the last.

Passing the cuts, together with reforms to reduce wage protection and severance payments, should clear the way for the European Union and International Monetary Fund to approve the $40 billion in rescue money.

Samaras wants the cash agreed at a meeting of euro zone finance ministers in Brussels on Monday, which would enable the government to meet a deadline next Friday for redeeming a $6.4 billion treasury bond.

The bailout money would be used mostly to recapitalize Greece's banks in the hope of priming a revival of lending that could inject life into an economy that has shrunk by 20 percent since 2008. Samaras said that would finally end speculation about any euro zone exit.

Others are less convinced.

Greek government forecasts last week showed the economic hole to be deeper than previously believed, with the economy expected to contract by another 4.3 percent next year. Debt is predicted to balloon to a whopping 190 percent of total economic output despite the repeated austerity waves.

Given such grim figures, the bailout funding could end up as just another temporary stopgap.

That fear is reviving talk about the need for longer-term measures to ease the pressure on Greece, such as giving it more time to pay back previous bailout loans, reducing interest rates and international action to buy back some of its debt from private investors at bargain rates

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The most controversial proposal is for official investors — governments, central banks and international bodies — to forgive Greece some of its debts, or at least postpone repayment for decades.

Greece owes almost two-thirds of its $400 billion debt to the official sector and experts at the IMF are beginning to argue for some of it to be restructured.

However, Germany opposes such measures. Europe’s richest country stands to lose large sums of money. It also fears debt forgiveness will remove incentives for Athens to push through reforms that would prevent a repeat of the crisis. Chancellor Angela Merkel is unlikely to soften her line ahead of next year's general election.

Without some sort of movement to ease the pain, however, many Greeks fear unrest will eventually undermine Samaras' fragile coalition and provide extremists with a path to power.

"It is irrational to carry on the course that has driven parts of the country’s population below the poverty line,” economic blogger Yiannis Mouzakis wrote recently. It “risks wiping out large parts of the middle class and leading to the radicalization of Greek society.”