Greece’s governing Socialists won a key budget vote calling for deeper austerity measures in the crisis-hit country and promising to avoid default despite a soaring national debt.
MPs voted 156-142 last night in favour of the 2011 budget, braving a third year of recession to trim €5 billion off the budget deficit through higher consumer taxes and cuts in health and defence spending. Two opposition parliament members were absent.
The latest cuts are needed for the country to continue receiving loans from bailout fund created for Greece by European countries and the International Monetary Fund. But the government is facing growing hostility from Socialist-dominated unions and even critics within its own party.
Prime minister George Papandreou insisted the austerity measures - including pay cuts for state workers, sale tax increases, and axeing employment rights - were working.
“We will not go bankrupt. In 2012 we will return to a path of growth ... we will not give speculators or ratings agencies the pleasure,” he told parliament shortly before the vote.
The budget calls for continued tightening in Greece’s €228.4 billion economy in 2011, and is aimed at lowering the deficit to €17 billion or 7.4 per cent of GDP.
But the country’s debt-to-GDP ratio is set to exceed 150 per cent next year, from 127 per cent in 2009, leading to continuing fears of eventual default.
Mr Papandreou has promised to return to the bond market some time in 2011, but warnings this month from three ratings agencies that Greek bonds are likely to suffer fresh downgrades have checked those expectations.
Unions, meanwhile, are stepping up protests.
The 24-hour strike yesterday by metropolitan transport workers caused traffic jams as commuters went to work by car or taxi. National rail workers also walked off the job, paralysing train routes, though flights and ferries were not affected.
Outside parliament yesterday, about 1,000 people took part in a peaceful protest organised by Greece’s two largest unions against the cuts. Protesters held banners reading “Ban layoffs, write off the debt” and “Open-ended strikes until our final victory”.
Many were urban transport employees incensed at recent pay cuts and the prospect of radical restructuring - without redundancies - for their state-run companies, most of which are rapidly losing money.
Athens transport unions have held intermittent strikes over the past three weeks against the reforms, which the government argues are necessary to keep urban transport running.
Mr Papandreou’s government has promised more unpopular reforms early next year, including the liberalisation of tightly regulated professions, and the restructuring of more troubled state companies.
AP