Bloomberg News

Greek Lawmakers Should Do Duty in Budget Vote, Papandreou Says

June 27, 2011

(See {EXT4 <GO>} for more on Europe’s sovereign debt crisis).

June 27 (Bloomberg) -- Greek Prime Minister George Papandreou called on lawmakers to obey their “patriotic conscience” and back tougher austerity measures, as they began to debate a five-year budget plan that will determine whether the cash-strapped nation can avoid default.

“Voting for the medium-term plan means we can close this chapter of uncertainty for the Greek people,” Papandreou said at the start of a three-day debate on the program in Parliament in Athens today.

Papandreou will face his second survival test in a week on June 29 when lawmakers vote on the package of budget cuts and asset sales that’s needed before Greece can tap a fifth loan payment from last year’s 110 billion-euro ($157 billion) rescue. Failure to pass Papandreou’s 78 billion-euro plan may lead to the euro area’s first sovereign default.

“I am fully aware of the reality, fully aware of the risks for the average Greek and their quality of life and for the country as a whole,” Finance Minister Evangelos Venizelos said in Parliament in the same debate. “We have to stabilize the situation so that we can immediately in a short time improve the situation. But we must first survive on a fiscal basis to be able to improve this situation.”

With 155 votes in the 300-seat legislature, Papandreou needs to unite his lawmakers in two votes this week on wage cuts and asset sales. Two ruling-party lawmakers have said they may vote against the legislation, in part due to their opposition to plans to sell a stake in Public Power Corp SA, the former electricity monopoly. Workers at Public Power have held rolling 48-hour strikes for the past week, leading to power cuts around the country.

General Strike

The austerity measures have prompted the fourth general strike this year by unions from midnight. The 48-hour walkout will affect government services, flights and public transport.

Air traffic controllers will cease work for eight hours on both days, according to a statement on the union’s website. That will force carrier Aegean Airlines SA to reschedule 97 flights and cancel 26 of them tomorrow and Olympic Air to cancel and reschedule 52 flights.

Bus, trolley, and tram workers in Athens will join the strike, as will staff at Hellenic Railways Organization, Greece’s state-run rail company. Dockworkers, journalists, health-care and municipal workers will also participate.

Backing Sought

Papandreou has spent the past 15 days trying and failing to muster opposition backing for the package, while keeping his own party in line. He appointed a new finance minister to stem defections, survived a confidence vote and outlined 5.6 billion euros of additional budget measures. On June 24, he won a pledge for a second bailout from European Union leaders, on the condition that he delivers domestic support for the retrenchment.

“The lack of political seriousness, responsibility and accord costs and will cost a great deal,” said Venizelos, who was named finance minister by Papandreou on June 17. “It has a fiscal cost and costs the pocket of each Greek. All this weighs on incomes, the pensioner, the unemployed, each company, each household.”

Greece needs to cover 6.6 billion euros of maturing bonds in August.

An accompanying law on the five-year plan which was submitted to Parliament on June 27 must also be approved this week by the deadline of June 30.

Recession Impact

Implementing more austerity measures threatens to deepen a three-year recession and complicate efforts to boost government revenue. Greek gross domestic product, which contracted 4.4 percent in 2010, will shrink a further 3.8 percent this year, according to a report from EU and IMF inspectors in June. The nation’s debt load will peak at 166 percent of GDP next year, and is already the biggest in the euro-region’s history.

Papandreou’s plan includes higher taxes on restaurants and bars, higher heating-oil taxes and lowering the tax-free threshold to 8,000 euros from 12,000 euros presently. Greek newspaper To Vima calculated the additional burden for an average Greek family of four at 2,795 euros a year, about the same as one month’s income.

--With assistance from Tom Stoukas in Athens. Editors: Craig Stirling, Maria Petrakis

To contact the reporters on this story: Marcus Bensasson in Athens at mbensasson@bloomberg.net; Natalie Weeks in Athens at nweeks2@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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