Greek govt faces another key test with budget vote | world | Hindustan Times
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Greek govt faces another key test with budget vote

world Updated: Nov 11, 2012 08:11 IST

Greece's government faces another test Sunday when lawmakers vote on the 2013 budget just days after narrowly passing a new austerity package to unlock more international aid and avoid default.

Lawmakers began debating the budget on Saturday, as several hundred civil servants demonstrated outside parliament against plans to reduce their numbers by some 125,000 by 2016 as part of the latest austerity package.

Trades unions have called another demonstration outside parliament for Sunday.

The package includes 18.5 billion euros ($23.6 billion) of cuts and labour reforms. It was passed in the face of social unrest in a country that is facing a sixth year of recession amid soaring unemployment that reached 25.1 percent in July.

But after the hard-won vote squeaked by in parliament by only a handful of votes, European partners told Athens that more work was needed to secure a new 31.5 billion-euro slice of international aid.

Without the new aid tranche, Greece risks default on November 16, when Athens must repay a three-month treasury bill worth five billion euros.

Eurozone finance ministers will meet in Brussels on Monday, although they are not expected to approve releasing the latest aid tranche to Greece.

One EU official, speaking on condition of anonymity, said that Greece's creditors would find ways to avoid a default.

"There will be no default, not accidental, not premeditated," the official insisted Friday.

Greek Finance Minister Yannis Stournaras also said on Friday that "there is no reason to worry."

"Greece is doing what it has to do, and so is Europe, the tranche will be paid," he said.

But German Finance Minister Wolfgang Schaeuble, in an interview with the Sunday edition of Die Welt newspaper, said the ball was in Greece's court.

"Nobody in the eurozone opposes the idea of accepting the payment of the next tranche of aid," he added. "But only when the conditions have been met.

"And that, that is for the government in Athens to take care of."

Sunday's budget vote presents another major challenge for the government of Prime Minister Antonis Samaras. His three-party coalition has lost 10 deputies since taking power in June and today has 169 lawmakers in the 300-seat chamber.

Wednesday's vote on the austerity package squeezed by with just 153 voting in favour: junior coalition partner the Democratic Left refused to support the package. Seven deputies from the coalition's other two parties also jumped ship and were promptly kicked out of their political groups.

Going into Sunday's vote, Samaras's conservative New Democracy has 126 lawmakers, the Socialist Pasok has 27 and the Democratic Left has 16.

The 2013 budget predicts the economy will shrink by a worse-than-previously-expected 4.5 percent next year and that the country's debt mountain will swell to 346 billion euros ($450 billion): 189 percent of economic output.

It predicts a 5.2-percent public deficit, up from the previous forecast of 4.2 percent.

The government is planning 9.4 billion euros ($12.2 billion) in cuts, hitting mainly state wages, pensions and benefits, already drastically reduced over the past two years.

But it will still need to borrow over 68 billion euros next year, the draft budget said.

Greece is currently surviving on two huge bailout packages from its troika of creditors.

In March, private creditors also agreed to erase more than 100 billion euros ($127 billion) in the Greek public debt.

The austerity measures stipulated in the bailout packages have triggered strikes and sometimes violent protests. Around 70,000 turned out for the latest demonstrations this week as parliament voted on the new austerity measures.