Greece must now deliver after budget passed

AddThis

Greece must now deliver after budget passed

Greece must now deliver after budget passed

Wednesday, December 7, 2011
  • papa
Papademos says the budget is a key first step towards reversing disastrous past policies.

ATHENS: After months of wrangling, soul searching and violent protests, Greece has finally passed its 2012 budget -- but now comes the hard part, living with it as the economy slumps and the eurozone struggles for survival.

 

"The situation in Europe is becoming more and more difficult and the time for crucial decisions is coming," business daily Kathiemrini said in an editorial on the budget, passed by 258 votes to 41 in the early hours Wednesday.

 

"Unfortunately, the possibility of our having to leave the euro has not gone away but that does not mean that we cannot fight the battle and win it ... We are going to have to do the hard and unpleasant work," it said.

 

Greece is reeling from the shock to its pride and credibility after financial markets turned against it because of its massive, unsustainable debt mountain of more than 350 billion euros (RM1,490 billion), forcing Athens to seek EU-IMF bailouts.

 

Many feel bitter about the way the country is portrayed as the culprit of the eurozone debt crisis and resent what they see as the intrusive oversight of the EU and International Monetary Fund after a first debt rescue in 2010.

 

At the same time, opinion polls suggest most of Greece's small population of 11 million want to stay in the eurozone and the European Union.

 

Prime Minister Lucas Papademos told parliament that the budget was a key first step in reversing the disastrous policies which have left each Greek burdened with more than 30,000 euros in state debt.

 

"Our actions will determine the country's economic future, not only for 2012 but for the entire decade," said Papademos, who took over last month with the task of ratifying a second EU-IMF debt deal and holding early elections.

 

The premier, a former European Central Bank deputy chief, also insisted that Greece's position in the European Union and the euro was non-negotiable.

 

"The Greek people will defend it in every way possible ... Europe and our common currency remain, despite the crisis, one of the noblest achievements of recent history," Papademos said.

 

The government warned during the debate that the stakes could not be higher as the country remains mired in recession and the eurozone comes under intense pressure to reform.

 

"A real earthquake is occurring in Europe at this moment," said conservative leader Antonis Samaras, part of the coalition government.

 

"We don't know where it will lead (so) we are in a hurry for Greece to capitalise as much as it can today," said Samaras, whose party holds a solid lead in the polls ahead of snap elections expected early next year.

 

The eurozone was rocked on Monday when Standard and Poor's warned it could downgrade the entire bloc -- including Germany, its powerhouse and paymaster -- if economic conditions worsen and leaders remain divided over over what to do.

 

Germany and France have taken the lead to push major changes in the way the bloc is run to ensure much tighter fiscal oversight from Brussels in the run-up to what appears now to be a make-or-break EU summit on Thursday and Friday.

 

The Brussels meeting is supposed to agree the major institutional changes to stop the debt crisis which has pushed Greece, then Ireland and Portugal into EU-IMF debt bailouts and now threatens Italy and Spain.

 

With the budget passed, the key issue for Greece is implementation after it missed deficit and debt targets laid down in the first EU-IMF rescue in 2010 and was then forced to seek more help as the economy slumped.

 

It puts the public deficit at 5.4 per cent of gross domestic product (GDP) in 2012, down from 9.0 per cent this year -- which was originally fixed at 6.8 per cent and compares with the EU ceiling of 3.0 per cent.

 

The second accord agreed in late October required Greece to adopt tougher austerity measures in return for new funding of 100 billion euros and a controversial debt write-down deal with creditor banks worth 100 billion euros.

 

It also made available 30 billion euros to help local banks cover the losses on their holdings of Greek government bonds caused by the 50-per cent bond write-down which in turn should cut the total debt to around 120 per cent of GDP from 160 per cent..

 

Finance Minister Evangelos Venizelos said that Greece will host a new round of talks with its international creditors next week, with the bond write-down controversial and difficult to finalise, according to banking sector sources.

 

"There will be a consultation, a discussion with the representatives of the private sector over the specific means of their participation in the reduction of public debt," Venizelos told parliament ahead of the vote