Greece agrees to cuts package

Ap
Thursday 06 May 2010 17:53
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The crucial Greek austerity bill was passed by parliament tonight.

The cuts it will bring are needed to release funds in 110 billion euro (£94 billion) three-year rescue package of loans from the other 15 euro-zone countries and the International Monetary Fund.

The vote was carried out by roll call, and reached the simple majority of 151 votes in favour in the 300-member parliament to pass.

The governing Socialists have 160 seats, but three of their deputies abstained.

Greeks have been outraged by the measures, which slash salaries and pensions for civil servants and raise consumer taxes. Thousands of people gathered outside parliament to protest at the measures.

The bill passed with 172 votes in favour and 121 against. Prime Minister George Papandreou expelled the three deputies who abstained and did not vote in favour, kicking them out of his Socialist party's parliamentary group.

The move leaves him with 157 deputies, still a comfortable majority.

Conservative opposition leader Andonis Samaras kicked out former Foreign Minister Dora Bakoyiannis who broke party ranks voted in favour of the bill. The main opposition party now holds just 90 seats.

Mr Papandreou and his finance minister insisted the austerity measures and the rescue package they are linked to were the only hope for the country to avoid bankruptcy.

"Today things are simple. Either we vote and implement the deal, or we condemn Greece to bankruptcy," Mr Papandreou said before the vote.

"Some people want that, and are speculating (on it), and hope that it will happen," he said, referring to speculative attacks that have been blamed for raising Greece's borrowing costs to unsustainable levels. "We, I, will not allow that. We will not allow speculation against our country, and bankruptcy to happen."

The rescue loans are aimed at containing the debt crisis and keeping Greece's troubles from spreading to other countries with vulnerable state finances such as Portugal and Spain. The money will come from the International Monetary Fund and the 15 other governments whose countries use the euro.

Fears of Greek default have undermined the euro, and while the current package should keep Greece from immediate bankruptcy its long term prospects are unclear. Its growth prospects are weak, and the population's willingness to accept cutbacks may wane, leading some economists to predict an eventual debt restructuring somewhere down the road.

Finance Minister George Papaconstantinou said the government had no choice but to impose the austerity measures, which were being rushed through Parliament as urgent legislation because the country was two weeks away from defaulting on bonds maturing on May 19.

"The state's coffers don't have that money," Mr Papaconstantinou said. "Because today ... the country can't borrow it from the international market. And because the only way for the country to avoid bankruptcy and suspension of payments is to take the money from our European partners and the International Monetary Fund."

But in order to receive the funds, Greece must agree to a three-year austerity program.

"We are asking for loans from countries that also have deficits and from countries that are also the subject of speculative attacks. And for those to be granted, we must persuade them that we are putting our house in order," Mr Papaconstantinou said.

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