Despite protests, Greek Socialists win budget vote

[December 23, 2010]  ATHENS, Greece (AP) -- Greece's governing Socialists won a key budget vote in Parliament early Thursday, calling for deeper austerity measures in the crisis-hit country and promising to avoid default despite a soaring national debt.

Lawmakers early voted 156-142 in favor of the 2011 budget, braving a third year of recession to trim euro5 billion off the budget deficit, through higher consumer taxes and cuts in health and defense spending. Two opposition parliament members were absent.

The latest cuts are needed for the country to continue receiving loans from the euro110 billion ($144 billion) bailout fund created for Greece by European countries and the IMF. But the government is facing growing hostility from Socialist-dominated unions and even critics within its own party.

Prime Minister George Papandreou insisted the austerity measures -- including pay cuts for state workers, sale tax hikes, and axing labor rights -- were working.

"We will not go bankrupt. In 2012 we will return to a path of growth ... we will not give speculators or ratings agencies the pleasure," he told parliament shortly before the vote.

The budget calls for continued tightening in Greece's euro228.4 billion economy in 2011, and is aimed at lowering the deficit to euro17 billion or 7.4 percent of GDP.

But the country's debt-to-GDP ratio is set to exceed 150 percent next year, from 127 percent in 2009, leading to ongoing fears of eventual default.

Papandreou has promised to return to the bond market sometime in 2011, but warnings this month from three ratings agencies that Greek bonds are likely to suffer fresh downgrades have checked those expectations.

Labor unions, meanwhile, are stepping up protests.

The 24-hour strike Wednesday by metropolitan transport workers caused morning traffic jams as commuters went to work by car or taxi. National rail workers also walked off the job, paralyzing train routes, though flights and ferries were not affected.

Outside parliament Wednesday, about 1,000 people took part in a peaceful protest against the cutbacks, organized by Greece's two largest unions. Protesters held banners reading "Ban layoffs, write off the debt," and "Open-ended strikes until our final victory."

Many were urban transport employees incensed at recent salary cuts and the prospect of radical restructuring -- without layoffs -- for their state-run companies, most of which are rapidly losing money.

Athens transport unions have held intermittent strikes over the past three weeks against the reforms, which the government argues are necessary to keep urban transport running.

Papandreou's government has promised more unpopular reforms early next year, including the liberalization of tightly regulated professions, and the restructuring of more troubled state companies.

[Associated Press; By DEREK GATOPOULOS]

AP writer Nicholas Paphitis contributed to this report.

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