Greek PM To Form New Government Amid Riots

The Greek Prime Minister has announced he will reshuffle his cabinet amid violent and chaotic protests against his austerity plans in Athens.

Earlier reports suggested George Papandreou was prepared to step down with Net TV saying he told opposition leader Antonis Samaras: "If I am the problem, I am not tied down to my chair. I can discuss everything, even a national unity government."

But in a televised address he has said he will "continue on the same course".

"This is the road of duty, together with PASOK's parliamentary group, its members, and the Greek people," he said.

"Tomorrow I will form a new government, and then I will ask for a vote of confidence."

The government reshuffle comes as officers in riot gear struggled to regain control of the capital's main square, where masked demonstrators demolished walls, throwing bricks, bottles and furniture.

The protest began peacefully at first light as organisers tried to form a human circle around the Parliament building.

Their aim was to prevent MPs debating an austerity package designed to rescue Greece's battered economy.

But through the night the police erected a 'steel ring' around the building with special metal gates thwarting efforts to halt parliamentary business.

The demonstration - estimated at 20-50,000 strong - was called to coincide with a one-day national strike which paralysed most public services and some private companies.

But different factions within the protest movement turned on each other. Fight and arguments broke out with many people blaming masked anarchists carrying clubs and 'hi-jacking' the event.

Unemployed economist Xenophon told Sky News: "I am deeply opposed to the cuts this government is trying to push through and we the People are determined to stop them.

"But violence has no place here whether it be from demonstrators or the police."

A hotel employee who joined the demonstration told us he felt that change was "in the air."

"I don't see how the politicians can go on defending these cuts. Something has to change."

Greece's Socialist-led government is trying to save 6.5bn euros to meet the demands of an international bail-out by the EU and the International Monetary Fund.

A first tier of austerity measures enforced last year plunged the country into a deeper-than-expected recession, with the economy contracting 5.5% in a year.

Unemployment has shot up to over 16%, with the rate exceeding 40% among young Greeks. Meanwhile tax revenues have plunged, exacerbating the funding shortfall.

Eurozone ministers have set a June 20 deadline to come up with a new Greek bailout plan.

But the measures have led to a series of mass protests and intense social upheaval.

This is the third strike to see millions walk out of work since the start of the year, disrupting sea, rail and public transit services across the country.

Revolutionary Wolf wrote:It is interesting how we in the United States hear next to nothing of such developments from our national media. The class-based nature of such organizations is truly apparent.

A rescheduling of Greek debt would solve nothing but could mark "the beginning of the end" of the eurozone, the head of the French AMF market regulating body Jean-Pierre Jouyet warned on Friday.

But a rescheduling could also mark the opening of a new phase of cooperation between EU governments, he said.

Jouyet, who is president of the French Authority for Financial Markets, referring to German pressure for a rescheduling, told RTL (Berlin: R8L.BE - news) radio: "That could be either the beginning of the end, or the beginning of a new (phase) of European integration."

He said: "What is at stake through Greece is the credibility of the eurozone and of the construction of Europe (Chicago Options: ^REURTRUSD - news) ."

He said: "The Greek problem reveals that there is a very strong clash between a single currency ... and an economic and financial organisation for Europe which is not strong enough."

The Greek crisis also showed that some European countries "are living above their means."

He said that a rescheduling of Greek debt would not solve the problems confronting Greece, would undermine confidence in commitments by Europe, and would not permit the European Central Bank to continue helping Greece.

This was a reference to warnings by the ECB that a restructuring could pose such dangers of an outflow of funds from Greece and that the ECB could no longer provide continuous support to the Greek banking system.

Jouyet's use of the term "construction of Europe" refers to the founding principles of the European Union after World War II to ensure stability in Europe via a new architecture of common policymaking.

France, like the ECB, has expressed strong reservations about pressure from Germany for private lenders to Greece to accept to lose money as part of any new rescue.

French President Nicolas Sarkozy and German Chancellor Angela Merkel were meeting in Berlin on Friday precisely on this matter.

Asked about this disagreement, Jouyet said that it did not concern the fundamental issues but only the means of reaching a solution.

Objections to a restructuring of Greek debt involving losses for banks, insurance companies, savings and pension funds which have lent money to Greece, are based on concern that such a route would radically reduce confidence in Greece.

That could cause an outflow of funds, ramp up pressure on other weak eurozone members, and may cause the ECB to enact its threat to cut off lifeline finance to the Greek economy via the banks.