Business | Economy
Greek cabinet gives nod to austerity steps
Move necessary to secure second bailout package
- Bloomberg
- Published: 00:00 February 12, 2012
- Image Credit: EPA
- Riot police clash with protesters during a rally at the parliament in Athens on Saturday. The support capped a week of tension as EU and IMF officials argued with Greeks over the conditions to secure a €130 billion bailout.
Athens: Greek Prime Minister Lucas Papademos yesterday won Cabinet approval for deeper budget cuts needed to secure a second package of international aid, preparing the way for parliamentary vote in his race to prevent financial collapse.
The 287-page document was approved unanimously, said a government official. The backing means parliament will probably vote on budget measures equal to 7 per cent of gross domestic product over the next three years and a debt swap to cut €100 billion (Dh491 billion) off more than €200 billion of privately-held debt.
"The social cost this programme implies will be limited compared to the economic and social catastrophe that would follow if we don't adopt it," Papademos told his ministers earlier, according to a transcript of his comments. "The completion of the programme and financial support will cement our country's future in the euro area."
The support capped a week of tension as European Union and International Monetary Fund officials argued with Greek officials over the conditions to secure a €130 billion rescue package. Papademos on February 9 reached an accord with leaders of the three parties supporting his interim government hours before a crucial meeting of euro-area finance ministers in Brussels, only to be told it needed more work.
‘Time for responsibility'
"Now is the time for responsibility for all of us toward our country," George Papandreou, the former prime minister of Greece and the leader of the socialist Pasok party, said today in a televised speech in Athens. "The recipe for the programme isn't right or wrong. It's the only one available."
Antonis Samaras, the leader of New Democracy, the second-biggest party, said a write-off of debt through a voluntary exchange will allow the country to move away from the precipice. "It won't solve the problem, but it will help," Samaras told his party's lawmakers in Athens, in comments televised live on state-run NET TV. ‘'It distances us from bankruptcy, looting, the chaos that would follow.''
He said it was self-evident that party discipline would be imposed during the vote on a second financing package. "I'm sure you will all do your duty by your country."
Samaras also said elections are needed as soon as financing is secured, as previously agreed on by party leaders.
Ministers resign
With only weeks remaining before a €14.5-billion bond payment on March 20, Papademos saw five ministers resign in two hours and protesters clashing with police in Athens during an anti-austerity strike.
"It should be evident that whoever disagrees and doesn't vote for the new program cannot remain in this government," he told his ministers. Political uncertainty, he said, was the main reason for finance ministers failing to approve the program.
German Finance Minister Wolfgang Schaeuble told lawmakers in Berlin that Greece was missing deficit goals and had to do more to meet its bailout commitments.
The LAOS party, with 16 members in the parliament, said it would oppose the plan.
Threat of default
Failure to secure the rescue package threatens 11 million Greeks with a default that would halt the payment of wages and pensions and shut schools, hospitals and businesses, Papademos said. The vote amounted to a ballot on euro membership, Finance Minister Evangelos Venizelos said on Friday in Brussels.
"If we see the salvation and future of the country in the euro area, in Europe, we have to do whatever we have to do to get the programme approved," he said.
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