Greece's coalition government overwhelmingly approved next year's austerity budget early Wednesday, increasing the scope of already tough spending cuts. The vote was marked by anti-austerity protests in the Greek capital.

By News Wires (text)

REUTERS - Greece’s coalition government on Wednesday passed an austerity 2012 budget aimed at shrinking its debt mountain with tax hikes and spending cuts, hours after protesters clashed with police outside parliament.

Three major parties backing technocrat Prime Minister Lucas Papademos voted solidly for the budget plan, a package of deeply unpopular measures needed to cut the deficit and show foreign lenders the country is sorting out its finances.

“Successful implementation of this budget will restore the country’s international credibility and create the conditions to rescue the economy,” Papademos told lawmakers who approved the plan with an overwhelming majority of 258 out of 300 seats in the wee small hours of Wednesday morning.

“We can’t afford to keep whining... the targets are ambitious but feasible,” he added.

But one of the leaders, conservative party leader Antonis Samaras, made clear his support was solely aimed at rescuing Greece from immediate default and vowed to soften tax steps and boost growth measures if he wins power in elections expected in February.

“Our disagreements remain... we are approving the budget because it is an absolute priority to safeguard the viability of Greek debt,” said Samaras, whose New Democracy party is the front-runner to win the next election but fall short of an absolute majority.

Samaras, who has long opposed the EU/IMF austerity policies imposed by his Socialist rival, former Prime Minister George Papandreou, under a 110-billion euro bailout agreed in 2010, made clear he will insist on snap elections in February, after Athens clinches a bond swap deal to cut the country’s debt.

Greece will continue talks with private bondholders on the specific terms of the deal next week in Athens, finance minister Evangelos Venizelos told lawmakers.

“Things are not simple and things are not easy. I call on all parties of the coalition to support the prime minister and myself... during difficult decisions and the even more difficult and delicate handling of the PSI (public sector involvement),” Venizelos said.

Greece’s economy is expected to shrink by more than 5.5 percent in 2011, its fourth straight year of recession, and the government expects GDP to shrink further next year, by 2.8 percent.

The budget is designed to cut the deficit to 5.4 percent of gross domestic product (GDP) from a projected 9 percent this year, and generate a surplus before interest payments—a key step to lower Greek debt.

The last time Greece managed a primary budget surplus was in 1993-2002, just after it joined the euro zone in January 2001.

Injuries and arrests in clashes

As lawmakers debated the budget, hundreds of masked youths hurled petrol bombs and clashed with Greek police outside parliament when protesters marched to mark the police shooting of a student in 2008, which led to the worst riots in decades and helped topple the then conservative government.

Police fired teargas at the protesters who pelted them with broken pavement slabs, sticks and petrol bombs for nearly an hour on Tuesday afternoon. Small groups set garbage containers on fire and smashed shop and bank windows.

A second bout of violence broke out when thousands joined an evening march, prompting police use tear gas again and form a cordon outside parliament.

Over two dozen people, including 14 policemen suffered minor injuries, police and a Reuters journalist said. Thirty-eight protesters were arrested and 11 were held on charges of attacking police officers and damaging private property.

The turnout was lower than similar protests in previous years and other recent demonstrations that drew tens of thousands, but remained a powerful reminder of the rising anger over austerity measures prescribed by Greece’s creditors.

Greece will narrowly avoid bankruptcy this month after the European leaders and the International Monetary Fund agreed to dole out the latest tranche of financial aid that had been held up for weeks over political squabbling in Athens.

But the money comes at the price of painful reforms and many chanted slogans against the EU and IMF as they marched to parliament. Some held up banners like “Rise and join the December revolution”. Minor clashes also broke out in the northern city of Thessaloniki.

“There is a silent anger, something like an undertow, and this is dangerous,” said Mary Bossis, professor of International Security at the University of Piraeus.

“No magic solution”

Most Greeks expect their economic situation to worsen next year but they want to stay in the euro zone, polls show

“We must solve these problems which undermine social cohesion and hurt hundreds of thousands of young people,” Labour Minister George Koutroumanis told lawmakers.

“There are no magic solutions. But in 2012 we must try to bring back growth and investments that will create more jobs.”

Since the country’s debt crisis erupted in 2009, Greeks have repeatedly staged protests against austerity, which has helped push the country into a fourth year of recession and driven youth unemployment to a record high of more than 43 percent.

france24.com