/ 22 June 2011

Austerity vote allows EU, IMF to give Greece a chance

Austerity Vote Allows Eu

The Greek Cabinet approved a 2012-2015 austerity budget plan on Wednesday as well as laws for its implementation, a key condition for further European Union (EU) and International Money Fund (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 are worth more than €28-billion by 2015 and include a major privatisation programme to raise €50-billion — 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.

Summit
Papandreou attends an EU summit on Thursday and Friday in Brussels where the Greek debt crisis is very high on the agenda but he will at least be able to cite progress on the latest austerity package at home as he seeks a new debt deal.

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

Eurozone ministers had insisted on the latest measures before they would release the next tranche of debt funding worth €12-billion due under a €110-billion rescue package agreed with the European Union and International Monetary Fund in May last year.

The money will be used to pay debt 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.

Drama
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.

During the debate leading up to the confidence vote in the early hours, Papandreou had 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.

Looking ahead to the eventual vote in Parliament, Deputy Finance Minister Pantelis Ekonomou told Flash Radio that “these next 10 days are the most crucial in the last 30 years”.

Papandreou set the tone early on Wednesday with a dramatic plea in Parliament.

‘History will judge us harshly’
“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,” he said.

The union in the electricity operator PPC, which opposes the sale of a 17% 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, pointing to the closeness of the confidence vote. — AFP