Clinton backs Greek strategy on debt crisis (Reuters)

ATHENS (Reuters) – Secretary of State Hillary Clinton on Sunday voiced strong U.S. support for Greece's battle to overcome its debt crisis, saying it was taking the difficult steps required for future growth.

Clinton's visit to Athens was intended to signal Washington's backing for Prime Minister George Papandreou ahead of a meeting of euro zone leaders in Brussels on Thursday to decide on a new bailout package for Greece amid fears the debt crisis could spill over to Spain and Italy.

"Americans know these are difficult days, and again we stand with you as friends and allies," Clinton said at a news conference.

"The United States strongly supports the Papandreou government's determination to make the necessary reforms to put Greece back on a sound financial footing and to make Greece more competitive economically."

While Washington believes European countries should take the lead in managing the Greek debt crisis, it has also been pushing through its membership in the International Monetary Fund (IMF) to support Papandreou's austerity plans, which have led to violent protests at home.

Clinton said Greek's politically painful plan for a medium-term fiscal strategy and bringing down its whopping debt were like "chemotherapy," but would bring results in the end.

"I am not here to in any way downplay the immediate challenges because they are real. But I am here to say that we believe strongly that this will give Greece a very strong economy going forward," Clinton said.

Greek Foreign Minister Stavros Lambrinidis said that despite the popular outrage over the deficit reduction plan, the government was determined to forge ahead.

"We believe that we shall come out of this difficulty victorious," he said. "Many on both sides of the Atlantic have bet on the collapse of Greece and then have been proven wrong. We will continue to prove them wrong."

DIGGING OUT

Greece, which has launched an austerity plan, is hoping for a second European bailout package of about 110 billion euros of extra funds to keep it financed until the end of 2014, when it is supposed to return to financial markets.

Clinton was due to meet Papandreou, President Karolos Papoulias and Finance Minister Evangelos Venizelos before heading to the Acropolis museum in central Athens to sign a cultural agreement designed to prevent trafficking of Greece's rich trove of cultural artifacts.

Despite financial headaches on both sides of the Atlantic, U.S. officials say ties between Washington and Athens are strong and that Greece has been a valuable partner in NATO-led campaigns in both Afghanistan and Libya.

The United States was also grateful to Athens for taking steps to prevent a planned activist flotilla from sailing for Gaza earlier in July, heading off what Washington feared could have been a dangerous confrontation between the pro-Palestinian activists with Israel, which had vowed to block the ships.

U.S. officials said Clinton also discussed several of Greece's diplomatic priorities including remaining strains in its relationship with Turkey and slow reunification talks on the ethnically-split island of Cyprus.

Clinton, who arrived in Greece on Saturday after a visit to Turkey which included a meeting of the international contact group on Libya, is due to depart on Monday for a visit to India that will begin the Asian segment of her round-the-world trip.

(reporting by Andrew Quinn, editing by Peter Millership)

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Greece backs austerity despite violent protests (AP)

By ELENA BECATOROS and DEREK GATOPOULOS, Associated Press Elena Becatoros And Derek Gatopoulos, Associated Press – 1?hr?15?mins?ago

ATHENS, Greece – Greece approved more austerity measures needed to avert default next month, in a vote Wednesday that calmed markets but triggered a second day of riots that left dozens injured and the capital blanketed with tear gas.

The passage of the bill was a decisive step for the country to get the next batch of bailout loans from international creditors and was met with a huge sigh of relief in markets and by Greece's partners in the eurozone. A Greek default could potentially trigger a banking crisis, particularly in Europe, and turmoil in global markets.

Another bill has to be passed Thursday for the government to secure the money.

The bill to cut spending and raise taxes by euro28 billion ($40 billion) over five years, and raise euro50 billion ($71 billion) in privatizations over the same period of time, has provoked widespread outrage, coming after a year of deep cuts that have seen public sector salaries and pensions cut and unemployment rise to above 16 percent.

While deputies voted, stun grenades echoed across the square outside the Parliament building and acrid clouds of tear gas hung in the streets. The violence continued sporadically after the vote and smoke was billowing from beneath the Finance Ministry.

Authorities and emergency services said 31 police and 15 protesters were injured and transferred to hospitals, while 30 people were detained, and 11 arrested.

Volunteer doctors said they had treated about 40 people, most with facial injuries and breathing problems, at a makeshift treatment site at a metro station next to parliament. Protesters were seen leaving the site with bandaged heads.

Head medical volunteer Flegas Stagos said more seriously wounded protesters were put onto the metro with volunteers so they could receive treatment away from the tear gas.

The European Union and International Monetary Fund have demanded both bills pass before it releases a euro12 billion installment of the country's euro110 billion ($157 billion) bailout fund. Without it, Greece was facing defaulting on its debts by the middle of next month.

Even with the installment, Greece is still in financial trouble and has been in talks with its international creditors for a second bailout, which Prime Minister George Papandreou has said will be roughly the same size as the first.

"We must avoid the country's collapse with every effort," Papandreou said before the vote. "Outside, many are protesting. Some are truly suffering, others are losing they privileges. It is their democratic right. But they and no one else must never suffer the consequences and for their families of a collapse. We must do everything so that there is no freeze in payments."

The Greek vote was greeted positively in Europe's capitals, which have been fretting about the impact of a potential Greek default both on their banking systems and on the future of the euro currency itself.

"That's really good news," German Chancellor Angela Merkel said when told of the outcome of the vote on her way out of an economic forum in Berlin. Germany is Greece's biggest creditor.

EU leaders hailed the vote as an act of "national responsibility" and urged Greek lawmakers to follow up with another positive vote Thursday.

In a joint statement, the heads of the EU commission and council, Jose Manuel Barroso and Herman Van Rompuy, said Greece had taken "a vital step back — from the very grave scenario of default" and urged a second positive vote on Thursday to allow the next batch of money to be disbursed.

"It would also allow for work to proceed rapidly on a second package of financial assistance, enabling the country to move forward and restoring hope to the Greek people," they said.

Equally, relief was the main response in markets. Soon after the vote, the euro was trading at a fairly elevated level around the $1.44 mark while stock markets around the world were posting big gains. In Greece, the main Athens stock market closed up 0.5 percent at 1,264, while the country's borrowing costs eased some 80 basis points from a morning high, with the yield on 10-year bonds settling at the still high 16.55 percent.

"The fact that the Greek parliament has passed the government's medium-term fiscal plan clearly reduces the chances of a near-term disaster," said Ben May, European economist at Capital Economics.

Even if Greece gets more bailout funds, many economists think the country will end up defaulting on its debts in some form or another. Implementing the measures is not going to be made any easier if the widespread opposition continues.

"This is bad, the country will be sold for a piece of bread," said Dimitris Kostopoulos, a 48-year-old insurer. "There were many other more appropriate alternatives to this. Parliament has once again betrayed us."

In the run-up to the vote, violence engulfed the square outside for the second day, while services across the country ground to a halt in the last day of a 48-hour general strike. Riot police fired volleys of tear gas at swarms of young men hurling rocks and other debris as well as setting fire to trash containers.

Protesters threw flares and orange and green smoke bombs, and a few sprayed fire extinguishers at police, who picked up rocks and tossed them back. Heavy clouds of tear gas wafted over the chaotic scene.

The unpopular package of spending cuts and tax hikes passed by 155 votes to 138, with five opposition deputies voted "present" — a ballot which backs neither side.

A sole deputy from the governing socialists, Panayotis Kouroublis, dissented over government plans to sell a further stake in Greece's state electricity company and was quickly expelled from the parliamentary group by Papandreou.

In a dramatic vote, socialist deputy Alexandros Athanassiadis, who had previously vowed to vote against the bill, overturned his decision at the last minute and backed the package, saying he had been swayed by the prime minister's comments in parliament.

A conservative deputy broke ranks with her party's line to also vote in favor, bolstering the government's majority of five seats in the 300-member parliament.

____

Christopher Torchia, Demetris Nellas and Menelaos Hadjicostis in Athens and Geir Moulson in Berlin contributed.

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China blurs A380 order, backs 747 amid EU row (Reuters)

LE BOURGET, France (Reuters) – China downgraded the announcement of an Airbus superjumbo order and signed up for the Boeing 747-8 as deals worth $9 billion coincided with a row over European emissions trading rules, industry sources said.

The deals both involved parts of the HNA airlines group and had been planned before the Paris Air Show, they said, but the decision not to announce the names of the buyers triggered one of the mysteries of this week's event.

Industry sources said plans to announce a high-profile $3.8 billion deal between Airbus and Hong Kong Airlines for 10 A380 superjumbos were called off on Thursday because of China's anger over European plans to charge airlines for emissions.

China threatened last month to hold back on purchasing Airbus aircraft because of the EU emissions trading scheme, which airlines body IATA has called illegal.

Additionally, industry sources said a company affiliated to the same carrier, Hainan Airlines, was behind the unexpected announcement of an anonymous deal at Boeing this week.

Boeing said an unidentified airline had provisionally committed to 15 747-8 passenger jets worth $4.8 billion.

Airlines often choose to buy jetliners without identifying themselves to their competition, but such announcements are rarely made at air shows which are designed for publicity. Boeing also rarely announces deals before they are confirmed.

Airbus and Boeing declined to comment and representatives of the HNA Group were not available.

Hong Kong Airlines is 46 percent owned by HNA Group, the parent of Hainan Airlines Co Ltd.

TEMPTING TARGET

Airbus and Boeing both brought their largest passenger jets to the show, a biennial event which rotates with the Farnborough Air Show in Britain.

The 747-8 with 467 seats is Boeing's first stretched version of the 747 and is in the midst of flight testing. It will enter service initially as a freighter, then in a passenger version.

The 525-seat A380 is the world's largest airliner and Europe's most high-profile aircraft since Concorde, making it a tempting target in any political tensions affecting aerospace.

The Airbus deal has not itself been blocked and is in the manufacturer's order book, but the decision to cancel a signing ceremony is a clear protest signal, the industry sources said.

Aircraft purchases also need Chinese government approval.

The 747-8 purchase followed competition between Airbus and Boeing for the Hong Kong Airlines order.

While advancing development of its own smaller airplane, China tends to balance orders between the two foreign suppliers.

From Jan 1 next year, the EU will require all airlines flying to Europe to be included in the Emissions Trading Scheme (ETS), a system that compels polluters to buy permits for each tonne of carbon dioxide they emit above a certain cap.

China's top aviation industry body ramped up pressure on the European Union earlier this month, saying it would give full support to legal action against the forced entry of airlines into the EU's carbon trading scheme. [ID:nL3E7H60D5]

China says the scheme is unfair for developing countries and costly.

(Additional reporting by Matthias Blamont; Editing by Jon Loades-Carter)

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