Friday 23 June 2017

Greece's new government sees austerity budget passed by parliament

budgets

Marcus Bensasson and Maria Petrakis

GREEK Prime Minister Lucas Papademos has received parliamentary approval for the 2012 budget. His financial plan aims to almost halve the deficit and ensure that Greece remains a member of the eurozone.

A total of 258 lawmakers in the 300-strong chamber backed the confidence motion, with just 41 against.

"The economic crisis in our country is not a passing storm," Mr Papademos said before the vote.

"It will be lasting because it's the result of imbalances which swelled over a number of years. They are the result of accumulated mistakes and political shortcomings."

The 2012 fiscal plan, which forecasts a deficit of 5.4pc of gross domestic product and a fifth year of contraction, is designed to regain the confidence of creditors and secure the resumption of international financing for Greece.

Mr Papademos is racing against a three-month deadline to secure the loans and avert a collapse of the economy. He has so far convinced EU peers to release an €8bn loan.

Eurozone

This was halted last month by German Chancellor Angela Merkel and French President Nicolas Sarkozy after the former Greek prime minister George Papandreou said he planned to hold a referendum on the terms of a second bailout.

"Greece is and will remain a member of a united Europe and the euro area," said Mr Papademos, a former European Central Bank vice-president.

He added: "However, membership of the euro means abiding by rules and obligations."

Pension and wage cuts, higher taxes and a debt swap that will slash interest costs will help narrow the deficit from 9pc of GDP this year to to 5.4pc next year. GDP will shrink by 2.8pc next year, after contracting by 5.5pc in 2011.

Mr Papademos will now shift his focus to the second rescue package and a debt write-down, which must be completed by early next year.

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