Greece Passes Austerity Budget Amid Rancor
By NICK SKREKAS
The wall street journal.
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ATHENS—The Greek socialist government passed its 2011 austerity budget early Thursday, despite criticism from it own ranks and a wave of strikes and protests over the past two weeks.
Associated Press
A protester held a Greek flag sporting 'For-Sale' signs during a rally outside Parliament in Athens on Wednesday.
Greece's passage of the budget is a key precondition for it to draw further aid from bailout funds provided by its international lenders of last resort to avert a debt default.
Earlier Wednesday, Greece's two largest unions held rallies in front of Parliament, attracting several hundred protesters against the key budget vote.
Unlike last Wednesday, the protests didn't spark violence, but a 24-hour public-transport strike caused havoc in Athens.
In a vociferous final session of the five-day parliamentary debate, the ruling Pasok party used its 156-member majority, out of a total of 300 seats, to pass the budget.
"I continue to fight for the country without considerations of political cost, and my three objectives are to avoid bankruptcy, stabilize the economy and implement necessary restructuring reforms to promote growth and employment," said Prime Minister George Papandreou.
However, the government was subject to stinging criticism not only from opposition parties, but also in many cases from its own backbench deputies, who at times described the budget as "not credible," "not socialist" and "unfair."
To the relief of the Pasok party, the possibility of a few socialist deputies abstaining or voting against the key piece of legislation didn't happen. As recently as last week, a deputy refused to follow the party voting line on an unpopular bill, leading to his immediate expulsion, and a shrinkage of the government's parliamentary majority.
The 2011 budget includes fresh austerity measures because it aims to narrow the deficit to 7.4% of gross domestic product next year from a projected 9.4% gap in 2010.
Specifically, the budget includes cuts to the wasteful and inefficient Greek health sector, a freeze on pensions, deep cuts to payroll costs of deeply indebted state controlled enterprise, a further increase in value-added tax rates and lower defense spending.
"We will exhaust all opportunities to assist society's worst hit by the crisis and the measures as soon as possible," Mr. Papandreou said.
The measures are largely being imposed on the debt-laden Mediterranean country at the insistence of the International Monetary Fund and the European Union in exchange for their having provided a €110 billion ($144.6 billion) bailout in May to prevent default.
"Much of the blame for the current situation the country is in does not belong with our international lenders but is rooted in past mismanagement, and we have to recognize and change that," Mr. Papandreou said.
"The government's taxation policy has failed, and in early 2011 it will need to impose another extra €13 billion in austerity measures, at a time where the economy badly needs stimulus for growth," said Antonis Samaras, the main opposition conservative leader.
"Greece's debt-to-GDP will remain extremely high for another decade and it is unlikely that markets will lend to us," said Mr. Samaras, the New Democracy leader. "We will need to be able to resort to issuing E-bonds [Eurozone bonds from a unified European mechanism] before the end of 2012 if Pasok doesn't change its policy mix now."
Mr. Papandreou partially agreed in his response to Mr. Samaras that E-bonds should be adopted by the EU, calling for support of the proposal. "European institutions need to be strengthened with bold decisions and Greece must play a leading role in shaping developments," he said.
Meanwhile, leaders of two smaller opposition parties suggested that some form of a stoppage on Greece's mounting debt payments may be a solution, or an orderly sovereign default should be seriously considered.
"Have the proponents of debt default in this chamber seriously considered the consequences of such a move and the impact on the average Greek citizen?" Finance Minister George Papaconstantinou said.
The prime minister called on all political parties, and society as a whole, to contribute to the effort to help restore Greece's "autonomy" to "end its dependence" on foreign lenders within the signed memorandum's timeline for 2012.
"I will change Greece, and we will not default. The most painful measures are behind us," Mr. Papandreou added minutes before the final vote.
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