Greece Approves New Austerity Budget

Workers in Greece have demonstrated in the millions against the austerity measures imposed by the government resulting from the world economic crisis gripping the capitalist system globally. Another general strike was held on March 11, 2010., a photo by Pan-African News Wire File Photos on Flickr.

Greece approves new austerity budget

John Hadoulis
December 7, 2011 - 1:49PM
AFP

Greek MPs have approved a 2012 budget pledging tough fiscal goals demanded by EU partners in return for fresh loans.

A broad majority of the parties backing Lucas Papademos' caretaker administration secured the economic blueprint's passage by 258 votes to 41, the assembly said after the vote, which concluded after midnight on Tuesday.

Papademos had earlier described the budget as a key first step in a process to reverse disastrous fiscal policies that have burdened Greece with 350 billion euros in state debt.

"Our actions will determine the country's economic future, not only for 2012 but for the entire decade," said Papademos, who took over last month with the task of ratifying a key eurozone debt deal and holding early elections.

Papademos, a former European Central Bank deputy chief, also insisted that Greece's position in the European Union and the euro was "non-negotiable".

"Our place in Europe is non-negotiable. The Greek people will defend it in every way possible," Papademos said.

"Europe and our common currency remain, despite the crisis, one of the noblest achievements of recent history," he said.

Outside parliament, clashes broke out between protesters and police as thousands of pupils, students and leftist supporters staged separate demonstrations in memory of a schoolboy whose fatal shooting by police had sparked nationwide riots three years ago.

Protesters wearing gas masks and goggles threw firebombs and marble shards broken off from nearby buildings at police, who responded with tear gas and stun grenades to push them back.

Nearly 20 people including more than a dozen officers were injured during an earlier bout of midday clashes and police said they had made 11 arrests.

The budget vote could not come at a more sensitive time for the eurozone after Standard & Poor's warned it could cut its credit ratings on the bloc, throwing another twist into the debt crisis.

Germany and France are leading the charge for major change in the way the bloc is run to ensure much tighter fiscal oversight from Brussels and reacted sharply to S&P on Tuesday, saying they would push ahead with the needed reforms.

An EU summit on Thursday and Friday is intended to agree deep institutional changes to stop the debt crisis which has pushed Greece, then Ireland and Portugal into EU-IMF debt bailouts and now threatens Italy and Spain.

The key issue for Greece is implementation after it missed deficit and debt targets laid down in a first EU and IMF rescue in May 2010 and was then forced to seek more help as the economy slumped.

A second accord agreed in late October requires Greece to adopt even tougher austerity measures in return for new funding of 100 billion euros and a controversial debt write-down deal with creditor banks worth 100 billion euros.

The accord also makes available 30 billion euros to help local banks cover the losses on their holdings of Greek government bonds caused by the 50 per cent bond write-down.

The budget puts the public deficit at 5.4 per cent of gross domestic product (GDP) in 2012, down from 9.0 per cent this year, compared with the EU ceiling of 3.0 per cent and the previous forecast for next year of 6.8 percent.

Finance Minister Evangelos Venizelos told parliament Greece will host a new round of talks with its international creditors next week on making its enormous debt sustainable.

"There will be a consultation, a discussion with the representatives of the private sector over the specific means of their participation in the reduction of public debt," Venizelos told parliament ahead of the budget vote.