Greece passes austerity budget amid debt crisis

AP News
Posted: Dec 24, 2009 6:34 AM

Greece's Socialist-led parliament approved a 2010 budget aimed at reducing the country's high deficit by boosting tax revenues while slashing spending and restricting salaries and new appointments in the public sector.

Following a five-day debate in parliament, and amid pressure from markets and other European Union countries, all 160 Socialist lawmakers approved the budget in Thursday's vote, while 139 from four opposition parties opposed it, and one deputy was absent.

"We can't take aspirins to deal with this problem ... We have to change course," Prime Minister George Papandreou told parliament. He blamed Greece's struggling finances largely on corruption, tax evasion and government waste.

Greece has promised to reduce the budget deficit from a projected 12.7 percent of gross domestic product in 2009 to below 9.4 percent next year, and as low as 8.7 percent if further cuts are successfully implemented.

According to figures in the budget, the national debt is set to reach euro325 billion ($464 billion) next year, while GDP in 2010 is estimated at euro244.2 billion ($348.6 billion), with national output contracting 0.3 percent next year.

"There is no margin for error. The only margin there is is to improve our targets, and that is why we ... are aiming for a 4-point reduction in the deficit," Finance Minister George Papaconstantinou said.

Papandreou, whose Socialist Party won elections in October, faces an acute financial crisis that prompted three international ratings agencies to downgrade Greek bond ratings this month. He has promised to bring the deficit to below the 3 percent level required for countries that use the euro by the end of his four-year term.

Cost-cutting measures include a freeze in public sector hiring, and 10 percent cuts in social security and government operating expenditures.

Left-wing opposition parties warned that the spending cuts could further fuel unemployment and create more low-paid jobs in a country with a minimum monthly wage of euro740 ($1,055).

The country's jobless rate has jumped to a four-year high of 9.3 percent, according to figures released last week.

"We cannot afford to have another lost generation of euro700 ... We must take real steps to create jobs," said Alexis Tsipras, the 35-year-old leader of the Left Coalition party. The benefits of past years of profit, he said, "was squandered on tax breaks, tax evasion and deposits in Swiss banks accounts."