Greece approves austerity bill, setting in motion brutal budget cuts

Greece has approved an austerity bill that helps pull the debt-ridden country back from the brink of an immediate default. After days of public unrest and impassioned debate, the Greek parliament voted 155-138 on Wednesday in favor of the controversial bill, which authorizes $40 billion in brutal budget cuts and tax hikes over the next several years for a nation already reeling from previous belt-tightening measures.

The tense legislative showdown came as the country continued to squirm in the grip of a 48-hour nationwide strike and as tens of thousands of angry protesters thronged downtown Athens in noisy opposition to the austerity package. Police in riot gear scuffled with some demonstrators and tried to contain the kind of violence that on Tuesday left dozens of people injured, shop windows smashed and tourists running to escape tear-gas fumes.

Photos: Debt crisis prompts rioting in Greece

The government says the new spending cutbacks — some of the toughest in recent memory — are imperative if Greece is to stave off having to declare bankruptcy in a matter of weeks.


Without the new austerity package, the European Union and the International Monetary Fund have threatened to withhold the next installment of funds from the financial bailout they granted Greece last year. That would leaveAthens unable to pay bills coming due in mid-July.

“The choice is simple: Either we press ahead with the road of change, a road that is difficult, or we choose catastrophe,” Greek Prime Minister George Papandreou told parliament before the roll-call vote. “We choose the first. We ask you to give Greece a historic opportunity to move ahead and change.”

He warned lawmakers that without the austerity plan, Greece would face a deepened recession, heightened unemployment and crumbling living standards.

But Wednesday’s nail-biting vote is not the end of the issue. A follow-up bill that details how the austerity program will be implemented is to come up for a vote on Thursday; it, too, must pass in order for the next tranche of rescue loans to be disbursed.

The EU and the IMF have also insisted on the new austerity plan as a condition for a second bailout for Athens on top of the one they offered last year. With a shrinking economy, empty public coffers and abysmal bond ratings, Greece is effectively shut out from raising money in the private market and needs another lifeline from its European neighbors and the IMF to keep Greece afloat.

EU officials in Brussels are just as eager as Athens to avoid a Greek default, afraid that such an event would roil markets worldwide, hit European banks that hold Greek bonds and cause the debt crisis to spread to other financially shaky Eurozone countries such as Spain and Italy.

But economists question whether Athens can enforce its austerity program in the teeth of major public opposition. In addition to unpopular spending cuts and tax rises, the government has also committed to selling off about $72 billion worth in state assets, including public utilities.

Many analysts openly doubt that Greece will ever be able to pay off loans that far exceed the country’s entire economic output and predict that the country will eventually have no choice but to restructure its debt, a form of default. Still, the government’s victory in parliament Wednesday, plus a successful vote on the follow-up bill Thursday, should give Athens some breathing space, however brief.


To get the votes he needed, Papandreou faced down a revolt from some members of his own ruling Socialist party, which has a slender five-seat majority in parliament. Ministers resorted to political arm-twisting, threatening dissenters with expulsion from the party if they did not fall in line.

“Voting for these measures, regardless of any reservations, is an important, brave act of political responsibility,” Finance Minister Evangelos Venizelos told parliament Tuesday night during a debate that lasted for hours.

Nearly all opposition lawmakers voted against the bill. While acknowledging that cuts are necessary, the main opposition party, New Democracy, argues that the current austerity package will condemn Greece to low growth.

Public outrage presents another obstacle to the government in a land with a history of civil unrest and politically motivated violence. Many ordinary Greeks feel that they are being punished for the bad decisions and corrupt practices of current and past governments.


The demonstrators who have been camping out in Syntagma Square, in the heart of Athens, tried to prevent lawmakers from entering the parliament building for Wednesday’s vote.

About 5,000 riot police were on hand to try to contain outbursts of violence, most of it by self-styled anarchists who threw rocks and other projectiles and shattered storefront windows Tuesday. Protesters have also gathered atop the ancient Acropolis, where they unfurled banners urging activists to “organize” and “counterattack.”

Photos: Debt crisis prompts rioting in Greece


Special correspondent Anthee Carassava in Athens contributed to this story.