June 16, 2011
Greece shook global markets, intensifying fears of a default, as tens of thousands of demonstrators protested a new round of budget-cutting plans and its prime minister offered to step down to try to preserve them.
Protests across the capital sometimes turned violent as Prime Minister George Papandreou sought an agreement with opposition parties on austerity measures demanded as the price of a new bailout by euro-zone nations and the International Monetary Fund.
When his offer to step down in favor of a unity government failed, he instead announced in a late-night televised address that he would reorganize his cabinet Thursday and then call for a vote of confidence in Parliament.
That move could bring down his government in a matter of days. Mr. Papandreou's Socialist party has a Parliament majority of just four, following two defections in recent days. The cabinet shuffle, meanwhile, is likely to claim the head of Finance Minister George Papaconstantinou, the architect of the austerity measures who is widely respected by European officials but has become a key target of Greeks' ire.
The vote is likely to herald a further bout of intense uncertainty in financial markets already rattled by disagreements among the 17 nations that use the euro over terms of a new rescue package. Investors pulled out en masse Wednesday from riskier financial assets. Yields on Greek government bonds leapt to new highs, with two-year paper yielding 29%. Bond yields on other troubled euro-zone economies like Portugal and Ireland also moved higher, and stock markets in the U.S. and Europe sank as fears of contagion picked up. The euro plunged 1.9% against the dollar.
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