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Greece passes controversial austerity package

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Greek MPs have approved a new austerity package as it seeks to push through reforms required by the European Union and the International Monetary Fund in return for a second £110bn bail-out.

The legislation was passed by 199 votes to 74, however the coalition parties expelled more than 40 deputies for not backing the bill, which will amount to £2.8bn of cuts.

The vote, which was held under emergency procedures, partly clears the way for Greece to receive a second bail-out package and finalise a voluntary restructuring of £168bn of sovereign debt.

The new measures will see £252m in pension cuts and a 22 per cent reduction in the minimum wage to €560 a month. Thousands of public sector jobs are expected to be cut in the next three years.

Greece’s caretaker prime minister Lucas Papademos said the cuts were “the only alternative to a catastrophic default” and that failing to do so would force Greece to leave the Euro.

According to the FT, He said: “The social cost of this package is limited in comparison with the social and economic disaster that would follow if it is not adopted.”

The measures were passed as thousands protested in Athens. Buildings were set on fire amid clashes across the Greek capital, while violent protests were reported in other cities across the country.

Opponents to the package argued the austerity measures are stifling the economy and leading to soaring unemployment. Greece is currently in its fifth year of recession, while half of its young are jobless.

The passing of the deal did see markets in Asia jump overnight. In Japan, the Nikkei 225 was up 0.6 per cent, while the Hong Kong Hang Seng rose 0.5 per cent.

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Readers' comments (2)

  • Really? If you’re the average ‘man on the street’ in Greece, that’s an arguable contention.

    The only thing this settlement does is give an element of protection to European financiers, who are terrified of the consequences of a default and Greece leaving the Euro. Unemployment is rocketing, homelessness is at unprecedented levels, soup kitchens in Athens and other cities are doing a roaring trade, law and order is breaking down – and austerity measures are only going to make matters worse and people more desperate, which will result in an extreme political reaction of either left or right.

    Two questions -

    What’s the EU stance on military dictatorships amongst its membership?

    How on earth could a default be any worse than that for the Greek population?

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  • "Passing" a new round of austerity measures is one thing. Ensuring those measures are actually implemented and enforced is quite another, hence Germany's proposal that the EU should oversee just how Greece actually runs its economy, to which the Greek authorities remain fiercely opposed.

    For a start, tax avoidance/evasion is a national past time in Greece so, unless the Greek authorities implement a new and much tougher regime of enforcement when it comes to ensuring that its citizens pay their taxes, merely cutting jobs and transferring people to State support isn't going to make much difference, is it? And even if such a programme of enforcement is implemented, what will the Greek authorities be able to do those who can't or won't pay up apart from confiscate their homes (which hardly anybody else will be able to buy) or put them in jail?

    And €14.5 Bn of this latest hand-out will be going to redeem maturing Greek government bonds, i.e. straight down the drain. How many bodies are going to be prepared to buy into the next round of issues?

    All this latest hand-out constitutes is a postponement of Greece's inevitable disorderly default in the hope that all the other EU member states will, by the time it happens, have managed to brace themselves for the fall-out that it'll cause. The big fear is that if Greece defaults, the result will be a domino effect, with countries such as Spain, Italy, Portugal and Ireland deciding that if Greece can get away with defaulting on its debts, then they may as well follow suit. Why not?

    It all goes back to the barmy idea that if the wealthy countries gave all the poorer countries huge hand-outs without either collateral or conditions attached, then those countries would use the money in a responsible manner to become wealthy countries too and everyone from then on would trade prosperously to the benefit of all. Pie in the sky gambles with OPM don't get much bigger or reckless than that, do they?

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