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Europe

Greek cabinet passes austerity budget

Text by News Wires

Latest update : 2011-06-23

The Greek government approved Wednesday an austerity plan which includes a major privatisation programme aimed at raising 50 billion euros. The budget is a key condition for further EU-IMF help to tame the country’s massive public debt.

AFP - The Greek cabinet approved Wednesday a 2012-2015 austerity budget plan as well as laws for its implementation, a key condition for further EU-IMF help to tame a massive public debt, government sources said.

The government had committed to another round of stiff budget cuts and tax hikes in return for fresh EU-IMF cash and a new debt rescue deal.

The austerity measures will add up to more than 28 billion euros by 2015 and include a major privatisation programme to raise 50 billion euros -- a provision bitterly opposed by the unions who plan a 48-hour general strike in protest.

The government won the confidence motion by 155 votes to 143 but Prime Minister George Papandreou now faces a fraught challenge to overcome dissent within his Socialist party over the debt-cutting onslaught.

Papandreou attends an EU summit Thursday and Friday in Brussels where the Greek debt crisis is very high on the agenda.

His eurozone peers will be very anxious to know if he can get the latest steps through parliament after the close confidence vote.

Eurozone ministers have insisted on the latest measures before they would release the next tranche of debt funding worth 12 billion euros ($17 billion), part of a 110-billion-euro rescue package agreed with the European Union and International Monetary Fund last year.

The money will be used to cover debt repayments coming due next month and give Greece and its partners time to work on the next step -- a new rescue plan to keep Greece solvent for long enough so that it can grow its way back to fiscal balance.

The Greek finance minister will meet officials from the EU, IMF and European Central Bank in Athens Thursday to review the implementation of the new measures, the ministry said.

Parliament's vote on the legislation promises to be dramatic, with the financial markets watching the outcome closely given fears that a Greek default could hit other weaker eurozone members or even sink the euro entirely.

In Washington, US Federal Reserve chief Ben Bernanke warned that the Greek debt crisis could threaten the stability of the global financial system, not just the eurozone.

"If there were a failure to resolve that situation, it would pose threats to the European financial systems, the global financial system and to European political unity," he told a press conference.

Bernanke stressed that the Fed is not part of the negotiations to resolve the crisis, but has been "kept well-informed," citing a conference call over the weekend with the G7 (Group of Seven) rich countries on the issue.

During the Greek parliamentary debate leading up to the confidence vote in the early hours, Papandreou called for support "to avoid bankruptcy and keep Greece in the euro core."

The most immediate concerns are over Ireland and Portugal, bailed out by the EU and IMF like Greece, while Spain, or even Italy and Belgium, are considered potentially at risk of being dragged down should Athens go bust.

"We have a unique opportunity (to change the country).... If we falter, if we lose heart and squander it... history will judge us very harshly," Papandreou said early Wednesday.

The union in the electricity operator PPC, which opposes the sale of a 17-percent stake in the company under the privatisation plan, on Monday temporarily cut power at the infrastructure ministry.

It also began hour-long electricity cuts around the country, intending to escalate them when the reforms are being debated.

"In the end, the decision on this matter will be decisive for the future of aid payments to Greece, not (the) vote of confidence," analysts at Germany's Commerzbank commented.

"(Socialist) members who were afraid of an early election... will not necessarily vote in favour of the government’s fiscal policy," they wrote.

 

Date created : 2011-06-23

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