Support for the bail-out of debt-ridden Greece was in doubt last night, leaving the country on the brink of financial meltdown as top German politicians said it should be forced to quit the euro.
Riots erupting during workers’ protests over planned public spending cuts, just hours after Greek Premier George Papandreou sought emergency £35billion of loans from eurozone countries and the International Monetary Fund.
The Greek government was finally forced to ask for international help after the cost of its borrowing spiralled to a new high, making it prohibitively expensive to borrow money to service existing debts.
Clash: Greek workers facing cutbacks battle police in Athens
Leading members of Germany’s Christian Social Union, sister party in Bavaria to Chancellor Angela Merkel’s Christian Democrats, said Greece should be forced out of the euro.
Leading CSU MP Hans-Peter Friedrich said: ‘Greece has not only a liquidity problem but also a fundamental growth and structural problem.’
He said that this should prompt Greek politicians to ‘seriously consider leaving the eurozone’.
Werner Langen, head of the CDU/CSU group in the European Parliament, added: ‘I am extremely sceptical as to whether the aid package conforms with European Union law and the German constitution.
‘The real alternative is for Greece to leave the currency union and become competitive again via hard structural reforms.’
Chancellor Merkel, whose country is the largest contributor to the Greek bail-out, has said she would be reluctant to help unless the stability of the euro was threatened and the Greek government implemented tough reforms.
Nationwide strike: Demonstrators rally in front of the Greek Parliament
The threat to the international lifeline to Greece came as its financial crisis dominated an IMF meeting in Washington yesterday attended by Chancellor Alistair Darling.
But in potentially good news for Britons, travel bosses predicted that the crisis could reduce the price of holidays to Greece and its popular islands like Crete and Corfu as it tries to lure more visitors with cut-price deals.
Greece has lost out this year to Turkey and Egypt, which have provided better value for holidaymakers.
Frances Tuke, of the Association of British Travel Agents, said: ‘The current debt crisis will not affect the value of the euro in the short-term but holidaymakers can expect plenty of deals as the Greeks try to lure us over there to give them much-needed revenue.’
However, British families who own holiday homes on the Greek mainland and its popular islands like Crete and Corfu face the prospect of paying 20 per cent surcharges on extensions and extra rooms they have added to their properties.
A draft bill going through the Greek parliament could result in British apartment and villa owners paying thousands of pounds more in taxes if they are found to have built undeclared rooms.
Currently, Greek property taxes are based on the size of all internal rooms.
But soon owners could be surcharged up to £600 or more for extensions.
The bail-out cash for Greece excluded any donation from Britain, which is not part of the eurozone.
In return for the cash lifeline, the Greek government has offered to impose a series of austerity measures, including a cut in public service workers’ pay, plus freezing pensions and raising taxes.
The moves have already led to street protests and strikes by Greek workers, and could lead to more in the next few days.
Analysts have warned that similar bail-outs might in future be needed in Ireland, Portugal, Italy and Spain.
Last night Liberal Democrat Shadow Chancellor Vince Cable said: ‘What has happened to Greece shows how quickly economic problems can snowball when there is not a coherent plan to ensure both the health of the public finances and growth in the economy.
‘While Britain is not in the same situation as Greece, we must be aware that damage to growth or implausible plans to tackle the deficit may send us down the same road.’
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