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Greece: Huge protests loom over austerity

Massive protests planned for Wednesday are first of three key events this week that will test Greece's resolve to deal with its debt crisis.

By Michelle Caruso-CabreraCNBC Anchor / October 18, 2011

Tourists walk past a pile of rotting garbage outside a Greek Orthodox church in Athens on Oct. 18, 2011. Greek railway workers and journalists joined ferry crews, garbage collectors, tax officials and lawyers on Tuesday in a strike blitz against yet more austerity measures required if the country is to avoid defaulting on its debts. Massive protests are planned for Wednesday.

Thanassis Stavrakis/AP

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ATHENS

The streets of Athens are filled with tension, and garbage.

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Sanitation workers, along with nearly all other civil servants, are on strike, leading to heaping piles of trash on corner after corner.

But all Athenians are tensely bracing themselves for three key events this week in the ongoing tragedy that is the Greek sovereign debt crisis.

The national newspapers proclaim in large 40-point type “Hellish Week,” or more sarcastically “It Begins — the Week of Thrills.” Both are a reference to a massive 48-hour strike, beginning Wednesday, that may bring out as many as 50,000 to 60,000 protestors.

The protest is timed for a controversial vote in parliament, scheduled for Thursday, that would effectively eliminate the minimum wage for millions of workers.

Behind the scenes the race is on for a decision on whether or not Greece will receive any more debt forgiveness, ahead of a meeting with European finance ministers on Oct. 23 in Brussels.

International banks have already agreed to a reduction of 21 percent. But participants in the discussions say there will be a greater “haircut” on the debt — somewhere between 30 percent and 50 percent, although the banking industry is fighting it tooth and nail.

The social cohesion of the country is being tested to its limits as it comes to grips with a debt crisis that means government workers are facing pay cuts and job losses, and the private sector is facing huge tax increases.

Greece now owes more than 360 billion euros, or half a trillion U.S. dollars. They are unable to borrow on the international markets, and are at the mercy of the European Union and the International Monetary Fund for quarterly cash injections so that, at a minimum, the government can keep meeting payroll.

Greater debt relief would be helpful to the Greeks. But there are strong opponents to the idea throughout Europe, who say it threatens contagion to the rest of the European banking system.

Still, even with more debt relief, the country faces major challenges.

Greece could be forgiven 100 percent of its debts and it would still have to make wrenching changes to its government and its society. It still doesn't have a balanced budget and needs to borrow in order to keep functioning.

Eventually, the government must create an economy that can grow in order to generate enough tax revenue to pay the nation's bills.