Money Matters, Simplified.
Greek parliament votes in favour of austerity measures
by Jamie Anderson - June 30, 2011 - comments
George Papandreou, the prime minister of Greece, said that Greece's foreign creditors - the EU and the IMF - had given "a vote of confidence in the Greek people" by offering rescue financing.
Stringent they may sound but these austerity measures were a sine qua non if Greece was to have any chance of coming back from the brink of defaulting on its debt.
These, not so politically popular, measures like lesser pay for public workers, higher attrition of public jobs and ramping up tax compliance were approved 155-138 by the nation’s parliament Wednesday.
Greece gets breathing space
The vote makes Greece eligible for the last $17 billion of the $156 billion debt crisis relief package from its European neighbours, giving it some hope to come out of the choppy waters.
“Passage of the austerity budget will make some breathe a sigh of relief that the debt crisis would not spread throughout the euro zone and result in a slower economy throughout the region,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
The five-year austerity plan, estimated worth $112 billion to the Greek economy, also paves the way for another, if and when required, bailout.
Had these measures not been passed, Greece would have run out of money within weeks and would have brought the entire European and perhaps even the global financial world, down on its knees.
“Passage of the austerity budget will make some breathe a sigh of relief that the debt crisis would not spread throughout the euro zone and result in a slower economy throughout the region,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
Long way to go
The latest measures also mark the second round of initiatives undertaken by the Greek parliament. Last year, pension cuts, sales tax increase, inclusion of additional items under the gambit of excise taxes and tougher eligibility for disability benefits were approved.
“For now, markets and European politicians in particular, can stand down. However, winning the battle is not the same as winning the war. Many hurdles are yet to be overcome. The big questions for Europe still remain,” said Keith Bowman, equity analyst at London’s Hargreaves Lansdown.
A double edged sword, these measures have dragged down the Greek economy. The unemployment rate in the nation has climbed to 16.2 percent, up from the 11.6 percent in March 2010.
Meanwhile, protesters gathered outside the parliament for the 2nd consecutive day, shouting, "Traitors, traitors!" The police repeatedly fired tear gas to maintain control after the vote.