EU Warns Greece Rejecting Austerity Means Default

ATHENS/BRUSSELS — The European Union warned Greek lawmakers on Tuesday their country faced immediate default unless they approve a hated austerity plan, as strikers began new mass protests against the EU/IMF-imposed measures.

With the Greek parliament debating a raft of spending cuts, tax rises and privatizations, the EU’s top economic official, Olli Rehn, dismissed reports that Brussels was working on fallback options to keep Greece afloat if the plan was rejected.

“The only way to avoid immediate default is for parliament to endorse the revised economic program … They must be approved if the next tranche of financial assistance is to be released,” he said in a statement.

“To those who speculate about other options, let me say this clearly: there is no Plan B to avoid default,” Rehn said.

The blunt alternative was underscored by Bank of England Governor Mervyn King, who told British parliamentarians that policymakers were working on ways to limit the damage from a potential default on Greece’s 340 billion euro ($485 billion) debt pile.

“What we’re doing is to say there is sufficient concern in the market about the possibility of default for us to think about contingency plans and the consequences of this event,” he said.

He urged greater transparency about sovereign exposures to prevent a sudden, broad-based loss of confidence in European banks in the event of a Greek default, which could trigger a new credit crunch.

Separately, Chinese Premier Wen Jiabao offered Europe a “helping hand” with its debt crisis during a visit to Germany on Tuesday and said his country could buy the sovereign debt of some troubled euro zone nations if needed.

“China has expressed support for Europe at various times. In other words, when Europe is in difficulty we will extend a helping hand from afar,” the Chinese premier told a joint news conference with German Chancellor Angela Merkel, adding that he hasfaith in the European economy and the euro and is optimistic that Europe could overcome its temporary challenge.

With Greece close to bankruptcy, trade unions promised to fill the streets of central Athens and surround parliament from Tuesday to try to prevent lawmakers approving the painful measures in votes on Wednesday and Thursday.

“We expect a dynamic and massive participation in the strike and the march to the center of Athens. We will have 48 hours of working people, unemployed, young people in the streets,” ADEDY public sector union leader Spyros Papaspyros told Reuters.

Some 5,000 police have been drafted into central Athens, mostly to protect parliament. Police fired tear gas to disperse a small group of youths throwing sticks and bottles on Tuesday during an otherwise peaceful protest by thousands in Syntagma Square outside the neoclassical legislature building.

More at MSNBC

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