Greek riot police have fired tear gas at hundreds of anti-austerity protesters who tried to break a cordon outside Parliament.
No arrests or injuries were reported after Tuesday’s clashes, during a demonstration by Greece’s two biggest labor unions against new harsh cutbacks demanded to avoid the country’s looming bankruptcy.
Police said up to 8,000 people took part in the protest outside Parliament. Another 6,000 joined in a separate, peaceful demonstration organized by a Communist union.
Heads of the three parties backing Greece’s interim government will confer with Prime Minister Lucas Papademos later Tuesday on new income cuts and job losses demanded by the country’s bailout creditors.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.
ATHENS, Greece (AP) _ Greek party leaders on Tuesday will seek a long-delayed agreement on harsh cutbacks demanded to avoid looming bankruptcy, amid intense pressure from its bailout creditors to reach a deal, a general strike disrupting public services and thousands of protesters taking to the streets of Athens.
Heads of the three parties backing the interim government will confer with Prime Minister Lucas Papademos on new income cuts and job losses, which Greece’s eurozone partners and the International Monetary Fund are demanding to keep the country’s vital rescue loans flowing.
A general strike against the impending cutbacks stopped train and ferry services nationwide, while many schools and banks were closed and state hospitals worked on skeleton staff.
Police said up to 14,000 people took part in two peaceful anti-austerity demonstrations in Athens. The separate marches were to converge on central Syntagma Square, outside Parliament, which has been the focus of demonstrations over the past two years of economic pain.
On Monday, Prime Minister Lucas Papademos’ government caved in to demands to cut civil service jobs, announcing 15,000 positions would go this year, out of a total 750,000. The decision breaks a major taboo, as state jobs had been protected for more than a century to prevent political purges by governments seeking to appoint their supporters.
Athens must placate its creditors to clinch a euro130 billion ($170 billion) bailout deal from the eurozone and the IMF and avoid a March default on its bond repayments.
Among the measures the EU and IMF are pressing Greece for is a cut in the euro750 ($979) minimum wage to help boost the country’s competitiveness. This reduction would have a knock-on effect in the private sector _ because private companies also base their salaries on the minimum wage _ and even unemployment benefits. Unions and employers’ federations alike have deplored the measure as unfair and unnecessary.
“It is clear that there is a lot of pressure being put on the country. A lot of pressure is being placed on the Greek people,” Finance Minister Evangelos Venizelos said during a break in talks with EU-IMF debt inspectors late Monday.
He called on coalition parties to work more closely together.
“To save Greece … will involve a huge social cost and sacrifices,” Venizelos said. “On the other hand, if the negotiations fail, bankruptcy will lead to even greater sacrifices.”
“No one is as strong as Hercules on his own to face the Lernaean Hydra,” a swamp monster in Greek mythology, he said. “We must all, together, fight this battle, without petty party motives and slick moves.”
A disorderly bankruptcy by Greece would likely lead to its exit from the eurozone, a situation that European officials have insisted is impossible because it would hurt other weak countries like Portugal.
But on Tuesday, the EU commissioner Neelie Kroes, in charge of the bloc’s digital policies, said Greece’s exit wouldn’t be a disaster.
Kroes told Dutch newspaper De Volkskrant that “It’s always said: if you let one nation go, or ask one to leave, the entire structure will collapse. But that is just not true.”
Greece has been kept solvent since May 2010 by payments from a euro110 billion ($145 billion) international rescue loan package. When it became clear the money would not be enough, a second bailout was decided last October.
As well as the austerity measures, the bailout also depends on separate talks with banks and other private bondholders to forgive euro100 billion ($131.6 billion) in Greek debt. The private investors have been locked in negotiations over swapping their current debt for a cash payment and new bonds worth 50 percent less than the original face value, with longer repayment terms and a lower interest rate.
Greek government officials say they expect private investors to take losses of an estimated 70 percent on the value of their bonds.
The EU-IMF bailout will also provide an estimated euro40 billion ($52 billion) to protect Greek banks from immediate collapse. Domestic lenders and pension funds hold some 34 percent of the country’s privately-owned debt.
However, the bailout has to be secured for the deal with private investors to go ahead as about euro30 billion from the bailout will be used as the cash payment in the bond swap deal.
Greece’s coalition party leaders held a first key meeting on the austerity measures on Sunday, and postponed a second round of talks by a day so Papademos could complete negotiations with EU-IMF debt inspectors that ended early Tuesday.
The leaders have already agreed to cut 2012 spending by 1.5 percent of gross domestic product _ about euro3.3 billion ($4.3 billion) _ improve competitiveness by slashing wages and non-wage costs, and re-capitalize banks without nationalizing them. But the details remain to be worked out.
Creditors are also demanding spending cuts in defense, health and social security.
European Commission spokesman Amadeu Altafaj Tardio said Monday that Greece was already “beyond the deadline” to end the talks.
Also Monday German Chancellor Angela Merkel warned that “time is pressing,” and “something has to happen quickly.”
While Greece remains cut off from international bond markets _ where it would have to pay interest of about 35 percent to sell 10-year issues _ it maintains a market presence through regular short-term debt sales.
On Tuesday, the public debt management agency said Greek borrowing costs dropped slightly as the country raised euro812 million ($1.06 billion) in an auction of 26-week treasury bills. The coupon was 4.86 percent, compared to 4.90 percent in a similar auction last month, while the auction was 2.72 times oversubscribed.
U.S. stock futures are falling as uncertainty about a tentative deal to resolve Greece’s debt crisis weighs on investor sentiment ahead of a summit of European leaders.
Dow Jones industrial futures are down 65 points to 12,549. The broader S&P 500 futures are down 7 points to 1,305. The Nasdaq composite is 14 points lower at 2,443.
The leaders gathering in Brussels hope to focus on how to stimulate economic growth when huge government spending cuts threaten to push many countries back into recession short term personal loan.
The latest data showed Spain’s economy shrank in the last three months of 2011.
European markets also declined. In Asia, most indexes fell as investors reacted to Friday’s release of data showing the U.S. economy grew more slowly than expected in the fourth quarter.
Greece’s finance minister believes his country will be able to reach a deal with private bondholders to cut its debt, despite tougher terms set by its eurozone partners.
Evangelos Venizelos said Tuesday “We have the green light from the Eurogroup to close the deal with the private sector in the next few days.”
Greece is in talks with private creditors to swap their existing bonds with news ones of a lower value and interest rates.
On Monday night, eurozone ministers decided to cap interest rates on the new bonds below 4 percent, less than the private creditors would like.
The bond swap will cut the face value of Greek bonds in half, thereby slicing some euro100 billion off its debt, and push repayments far into the future.
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Stocks closed modestly higher Monday after a reported threat to Germany’s credit rating deflated a morning market rally. The Dow Jones industrial average closed up 78 points, giving back much of a 167-point gain from earlier.
News reports Monday afternoon said Standard & Poor’s will put all nations that use the euro on “creditwatch negative,” meaning there is a 50-50 chance of a downgrade in the coming months. S&P had warned of possible rating demotions for many of the countries. But the inclusion on the list of Germany, Europe’s strongest economy, came as a surprise.
Stocks had risen strongly in the morning after the leaders of France and Germany called for a new treaty to impose greater fiscal discipline on European countries. Yields on Italian government bonds receded sharply after the new government of Mario Monti introduced sweeping austerity measures over the weekend. That suggests that traders believe Italy is less likely to default.
“There’s pent-up demand, and people will use any excuse to get back in, thinking there’s been too much pessimism,” said Brian Gendreau investment strategist with Cetera Financial Group. Despite strong signals about the U.S. economy, the market has been weighed down by negative headlines about the U.S. budget impasse, credit-rating downgrades of the U.S. and other nations, and Europe’s spreading crisis, Gendreau said.
The Dow Jones industrial average rose 78.41 points, or 0.7 percent, to 12,097.83.
The gains were broad. All 10 industry groups in the S&P 500 rose. Financials stocks were among the biggest winners. Investors have feared that U.S. banks might be dragged down by their close connections to the unstable European financial system.
JPMorgan Chase & Co. jumped 3.7 percent, the most in the Dow. Bank of America was the second-biggest gainer, rising 2.7 percent. Citigroup Inc. rose 5.9 percent, Morgan Stanley 6.8 percent.
The S&P 500 rose 13, or 1 percent, to 1,257. The Nasdaq rose 29, or 1.1 percent, to 2,656.
Investors are hoping that a summit of European leaders on Thursday and Friday will produce concrete measures to prevent a messy breakup of the euro currency, which is shared by 17 nations. Markets have been jittery because of fears that the euro might disintegrate, causing a sharp recession in Europe that would spread through the world economy.
While the statements from French President Nicolas Sarkozy and German Chancellor Angela Merkel were far from a long-term solution, investors are eager to buy on any hint of good news because they have been earning meager returns from relatively low-risk investments such as Treasurys and CDs, Gendreau said no faxing payday loans.
Italian bond yields dropped to their lowest level in a month, a day after the nation’s new government introduced austerity measures. That suggests traders believe that Italy is far less likely to default. The main Italian stock index jumped 2.9 percent.
Italy’s borrowing costs pulled back from a level that might have forced the nation to default. Analysts say bailing out Italy would be too costly and would hurt the credit standing of German and France, which have the strongest economies in the euro group.
The yield on the 10-year Italian bond plunged half a percentage point to 5.93 percent. It rose above 7 percent last month, a level at which other nations were forced to take bailouts. By comparison, bond yields in Germany, Europe’s largest and most stable economy, are roughly 2 percent.
Monday’s strong gains follow the best week in more than two years for U.S. stock indexes. The S&P 500 rose 7.4 percent last week, the most since March 2009. The Dow jumped 7 percent, the most since July 2009.
Markets are hopeful that, given the gravity of the situation afflicting the euro zone, the German and French leaders will come up with a common proposal for tighter integration on budget matters. Analysts say that such a plan could lead to further emergency aid from the European Central Bank, possibly through the International Monetary Fund.
In corporate news:
_ Gannett Co. leapt 10.2 percent after the media company was upgraded to “buy” from “neutral” by analysts at Lazard Capital Markets.
_ Incyte Corp. fell 2 percent after a Citigroup analyst downgraded the drug maker to “neutral” from “buy,” saying its new blood-disease drug Jakafi might not work as a long-term treatment.
_ SuccessFactors Inc. soared more than 50 percent after the company agreed to be sold to German software company SAP for $3.4 billion. SuccessFactors makes software specializing in human resources tasks. The deal is part of SAP’s plan to compete with software rival Oracle Corp.
Workers continued to stash more money in their 401(k) plans in the third quarter, but the stock market’s sharp decline only left them further behind in reaching their savings goals.
The average balance in Fidelity Investments’ plans dropped nearly 12 percent, falling to $64,300 by the end of September from $72,700 three months earlier, the company said Wednesday.
That setback snapped four consecutive quarters of increases, and even put investors behind where they stood a year ago. Their balances were down 2 percent compared with September of last year, according to Fidelity, the largest workplace savings plan provider, with 11.7 million participants.
Blame the 14 percent decline in the Standard & Poor’s 500 index in the third quarter. Investors worried about the European debt crisis and slow economic growth at home, leading to the stock market’s worst quarterly loss since the financial crisis in late 2008.
Workers’ 401(k)s are typically invested in bonds along with stocks to help reduce volatility. Third-quarter investment gains for bonds helped offset some of the stock market’s decline, preventing deeper damage to account balances.
The damage also was eased because workers set aside more from their paychecks to stash in 401(k)s, while employers increased matching contributions.
Fidelity said 84 percent of plan participants contributed over the past 12 months, the highest level in more than two years. Their average contribution was $5,890, setting a record, and up $200 from the same period a year earlier. Employers contributed an average $3,320, an increase of $220.
Over the past 10 years, about two-thirds of annual increases in account balances have been due to workers’ added contributions and company matches, with one-third the result of investment returns, said Beth McHugh, Fidelity’s vice president of market insights.
There are several reasons why changes in account balances don’t match the performance of market indexes. Results depend on the performance of the specific funds an investor holds. Plus, participants in 401(k)s also pay investment fees, which chip away at returns. Investment earnings and contributions can grow tax-free in employer-sponsored 401(k)s, which the government established to encourage saving for retirement.
Balances have risen eight of the 10 quarters since early 2009, when the stock market meltdown reduced the average to $46,200.
Workers who have stayed in the market haven’t been able to rely on investment gains to build up 401(k) savings, because stocks remain about 23 percent below their historic peak in October 2007. Instead, they’ve had to rely on contributions from themselves, and their employers.
Fidelity’s 401(k) participants appear to recognize that, McHugh said. Each quarter for the past two and half years, more workers have increased their contributions than cut them.
However, Fidelity reported a recent slight increase in hardship withdrawals from 401(k)s, reflecting the financial stress many workers face as the economic recovery struggles to find momentum. About 2.3 percent took hardship withdrawals over the 12 months ended Sept. 30. In the latest 12-month period, workers making hardship withdrawals removed an average $5,800.
“People are still looking at their retirement accounts as a source of funds,” McHugh said. “We recommend people look at it as a last resort.”
The major reason? Hardship withdrawals can subject the participants to taxes and possible early withdrawal penalties, if they occur before age 59 1/2. Withdrawals also leave less money in an account to grow as a result of potential market gains and compounding, setting an investor back further in reaching their goals.
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