The Greek parliament approved a harsh austerity plan on Thursday in the face of violent unrest, as European Central Bank inaction pushed down global markets fearful a debt crisis will engulf the eurozone. Shock waves from a crisis in a relatively small European economy spread far beyond the continent, with Wall Street falling and the Federal Reserve expressing concern about potential consequences for the U.S. economy itself.
On the markets, the euro slid against the dollar and tumbled against the yen after the ECB President Jean-Claude Trichet failed to offer any new measures to ease Greece’s debt crisis, while stock prices tumbled around the world. Greek police fired tear gas to repel stone-throwing protesters after lawmakers approved drastic austerity cuts Thursday needed to secure international rescue loans worth $140 billion.
The clashes followed violent street protests Wednesday that left three people dead after a bank was firebombed. In New York, Dow Jones industrials briefly plunged almost 1,000 points before recovering some as investors succumbed to fears that Greece’s debt problems would halt the global economic recovery. The Dow has managed to recover two-thirds of its losses and close down 347 at 10,520. But all the major indexes lost 3 percent in a day that recalled the market turmoil of the 2008 financial crisis.
Greek lawmakers voted (172-121) to approve the austerity measures, worth about $38 billion through 2012, that will slash pensions and civil servants’ pay and further hike consumer taxes. All of the major global markets fell on Tuesday on fears the Greek debt crisis would spread. North American markets took a dive after Greece passed its austerity bill and citizens there took to the streets in protest. The bulk of Thursday’s protests remained peaceful, in contrast with Wednesday’s rioting that left three people dead, 59 injured and 25 people arrested. Police said 50 stores, banks and offices were damaged and seven vehicles damaged or burned.