ATHENS—Thousands of Greek protestors poured into the streets before a key austerity vote on Thursday amid reports in Germany that a crunch EU summit would have to be postponed with a deal still too far off.
Though EU diplomats in Brussels said the report in Die Welt daily was “not serious,” suspicions of a delay were raised as Chancellor Angela Merkel cancelled at short notice a long-planned meeting with regional ministers.
The EU summit was originally scheduled for October 17-18 but it was postponed to Sunday to give officials more time to prepare what has been billed as a “comprehensive plan” to save the euro.
As uncertainties on the summit grew in Berlin, police in Athens fired tear gas and demonstrators turned on each other at a rally in central Syntagma Square, where 35,000 people gathered on the second day of a general strike that has crippled much of the country.
One man was reported killed after masked youths lobbed firebombs at Communist organizers tasked with maintaining order during the demonstration. The Communists counter-charged and regained control, with the police initially keeping back as the two sides hurled rocks at each other.
Demonstrators were planning to encircle parliament where lawmakers were to hold the final vote on the bill Thursday evening that introduces collective wage amendments, major tax break cuts, a new civil service salary system and temporary layoffs for thousands of public sector staff.
The government has repeatedly warned that the bill is needed to avert a public debt default, but to people in the streets the measures mean further belt-tightening in a country that has been mired in recession for months.
“I am a pensioner and they are reducing the already reduced pensions,” Georgia Tardeli told AFP. “The worst is the prospects this country has with the youth. The unemployment, the lack of goals. The lack of prospects and hope.”
Although Greece’s austerity bill passed a first, largely procedural reading late on Wednesday, a number of government deputies have threatened to reject an article on wage amendments in Thursday’s follow-up vote.
Finance Minister Evangelos Venizelos told parliament on Wednesday that Greece faced a “battle of all battles” in Brussels, where EU ministers were to meet from Friday, and would be unable to finalise its budget without the bill.
A Greek newspaper had reported on Thursday that a disagreement between the EU and the IMF could actually delay the auditors’ report needed to release the critical funds.
But European sources maintained the report had been submitted, though the IMF said Greece’s compliance with the terms of its bailout agreement were still under review.
A source at the Greek finance ministry described the report as “positive.”
With time running out, European Commission President Jose Manuel Barroso urged Europe’s leaders to show compromise ahead of the summit and said it was vital to agree to strengthen the European Financial Stability Facility (EFSF), the bloc’s primary weapon to stem the crisis.
Germany’s finance minister Wolfgang Schaeuble said on Thursday that Paris and Berlin were in “complete agreement” on the EU’s bailout fund, but no accord had yet been clinched at a European level.
According to one diplomat, EU leaders will discuss boosting the fund’s capacity to between “one and two trillion euros” from the current 440 billion euros, an insufficient sum should other struggles like Italy or Spain need a lifeline.
Economic outlook prior to the summit remained grim, with Germany, eurozone’s largest economy, expected to halve its growth forecast for next year when it releases updated economic indicators.
Having up to now weathered the economic storm better than its eurozone peers, Germany is expected to slash its growth forecast to 1.0 percent for 2012, from the 1.8 percent it had projected in April, according to government sources.
Amid the steady flow of downgrades, the European Commission is reportedly considering banning the ratings agencies from publishing assessments of EU countries in difficulties, the Financial Time Deutschland reported on Thursday.
France also received worrying news when the Zurich-based Bank of International Settlements said that French banks were the biggest lenders to Greece and Italy, with about half of Italian foreign debt – $416.37 billion – owed to French lenders.
The data comes just days after France was warned by Moody’s agency that it could lose its prized triple-A rating because the current economic crisis has significantly affected its fiscal health.
Underlining the urgency of the eurozone crisis, French President Nicolas Sarkozy left his wife in labour at a Paris clinic late Wednesday to rush to Frankfurt for talks with Merkel, missing the birth of the couple’s first child and his first daughter after three sons.
The leaders of eurozone’s top two economies have both vowed to save the euro, warning that its failure could destroy Europe.