Greek Prime Minister George Papandreou offers to resign as austerity protests swell

Angry protesters pushed the Greek government close to collapse Wednesday, putting Europe on notice that deep budget cuts to tame the region’s debt crisis face heavy public resistance and could crash on the rocks of national politics.

Thousands of people packed downtown Athens in an effort to block lawmakers from debating brutal austerity measures that European finance officials say are essential if near-bankrupt Greece wants their help to pay its bills. The gathering descended into violence — with some protesters hurling water bottles, rocks and firebombs — that took riot police hours to quell and helped spark a dramatic offer by Prime Minister George Papandreou to quit in favor of a unity government.

The volatile situation offered a stark example of the predicament facing the European Union as it tries to contain a debt crisis that has rattled markets for more than a year.

The EU has demanded painful spending cutbacks by Greece, Ireland and Portugal as the price of bailing out their cash-strapped governments. Spain and Italy also have passed major belt-tightening measures to avoid getting sucked into the euro mess.

But public opposition is growing in some of these countries, threatening to topple governments and to torpedo at home the collective solutions approved by EU leaders in Brussels.

In Athens, Papandreou’s Socialist government is seeking parliamentary approval of the austerity plan, including tax hikes, deep cuts in public-sector wages and a fire sale of state assets. Papandreou says the package is crucial if Greece wants additional bailout funds on top of the $146-billion lifeline promised by the EU and the International Monetary Fund last year.

But opposition leaders indicated Wednesday that they expected Papandreou’s resignation and the renegotiation of the bailout package.

After first offering to step down to make way for a government of national unity, Papandreou said on national television Wednesday night that he would reshuffle his Cabinet and seek a vote of confidence in Parliament.

“I have made repeated proposals to political parties for consensus. Today I renewed that attempt.... Despite my stance, the main opposition party handled this attempt like a public-relations drill,” said Papandreou, who is facing his lowest public approval ratings since taking office in 2009. “I will continue on the same path I charted.”

Outraged by previous budget reductions, thousands of Greeks have filled Syntagma Square in the heart of Athens over the last three weeks in protest. On Wednesday, the number ballooned to about 30,000 people, including members of the country’s two largest labor unions, which staged a 24-hour nationwide strike.

After three hours of scuffles, at least 12 protesters were arrested, shop windows around the square were shattered and thick plumes of tear gas hovered over the city, sending tourists scrambling for cover in side streets and alleyways.

“It wasn’t supposed to be this way,” lamented Stella Stamati, 43, a government-employed chemist who joined the protest with three colleagues.

Many of the demonstrators had been inspired by recent peaceful mass protests in Spain, where thousands of young people camped out in a Madrid plaza for days to shake their fists at government austerity policies and to express their frustration over a high level of joblessness that has hit the young the hardest.

Last month, Spain’s ruling Socialists were routed in regional and local elections widely seen as a rebuke of Prime Minister Jose Luis Rodriguez Zapatero’s plan to slash state spending to bring down the public deficit.

In neighboring Portugal, voters booted the government in a general election last week out of unhappiness with the terms of the country’s bailout from the EU and IMF, which will require difficult structural reforms to the economy. The new government, however, has largely pledged to stick to the conditions.

For their part, Ireland’s new leaders are pushing hard for a renegotiation of the EU-IMF rescue package their predecessors had agreed to, further widening the cracks in the veneer of European unity.

Critics blame Germany, Europe’s paymaster, for having dithered over rescuing Greece last year, when the crisis looked more containable, because of political considerations at home. Many Germans oppose the use of their tax money to bail out their fiscally troubled neighbors.

Markets have reacted to Europe’s infighting and Greece’s woes by pushing borrowing costs for Athens to unheard-of highs. On Wednesday, the cost of insuring $10 million in Greek bonds rose to a record $1.725 million a year, according to data provider Markit. This week, the Standard & Poor’s ratings firm downgraded Greek bonds to the lowest rating of any of the 131 states on its books.

henry.chu@latimes.com

Times staff writer Chu reported from London and special correspondent Carassava from Athens.