Greek government approves austerity plan
Papandreou's cabinet passes laws for the implementation of budget cuts necessary to secure an international bailout.
Last Modified: 22 Jun 2011 18:53
Greek have been protesting against their government's planned austerity measures for weeks [[EPA]

The Greek cabinet has approved a 2012-2015 austerity budget plan as well as laws for its application, a condition to get an international bailout, government sources say.

The decision on Wednesday came a day after George Papandreou's government survived a vote of confidence in parliament, following weeks of consecutive protests against planned tax hikes and budget cuts.

Greece's creditors are demanding that the prime minister gets parliamentary approval for $40.24bn in budget cuts and new taxes and for a $72bn sell-off of government assists by the end of June.

Only then will they hand over $17bn in bailout funds that Greece needs to avoid bankruptcy in mid-July.

The mood in financial markets was calm after the confidence vote, especially when compared to the firestorm last week when Papandreou's government was teetering on the brink following violent protests against the new austerity measures.

The French government called the Greek confidence vote "a very important step" towards more European aid for Greece, while the European Commission promised cash to kickstart the Greek economy if the austerity measures are passed.

Tensions remained on the streets of Athens, with 100 members of the powerful GENOP electricity workers union occupying the Transport Ministry on Wednesday to protest plans to privatise their company. Workers began rolling 48-hour strikes on Monday causing brief, country-wide blackouts.

"Our struggle is to protect the last big public business of the country," Nikos Fotopoulos, the union president, said. "Electrical energy is a public good and should not be played with."

Default feared

Greece is being kept financially afloat by a $157bn package of bailout loans granted by other eurozone countries and the International Monetary Fund last year, and has implemented strict austerity measures in return, cutting public sector salaries and pensions, increasing taxes and overhauling its welfare system.

But the country has struggled to meet its targets, missing many, and is now in negotiations for a second bailout, which Papandreou has said will be roughly the same size as the first.

Many financial experts believe that despite his best efforts, the task is too great and Greece is heading for a default.

A default could drag down Greek and European banks, endanger the finances of other weak eurozone countries such as Portugal, Ireland and Spain, and spark financial uncertainty across world markets.

Papandreou was meeting party legislators on Wednesday to shore up support.

All 155 legislators from Papandreou's Socialist party voted to back their leader in the 300-seat parliament, eliminating the chance of early elections.

As they voted, several thousand protesters outside Parliament chanted "Thieves! thieves!" and riot police guarded the building.

"I understand the anger, the fear, and the question whether we will make it,'' Papandreou said. "My answer is that we have been making it every day for the last 20 months, with difficulties and mistakes, with a price to pay and with sacrifices but we are succeeding."

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