Econintersect: The Greek parliament passed an austerity plan that introduced budget cuts totaling €3.3 billion by a vote of 199-74 on Sunday night. This amounted to a cut of about 3% in the previous budget proposed. The move was made in response to demands by the EU (European Union and the IMF (International Monetary Fund) that government expenditures be cut drastically before Greece could receive a €130 billion bailout needed before a bond maturity deadline of March 20. The demands have been made for the budget to be passed before the funds are delivered because a bailout in 2010 was made on the promise of cuts that never materialized.
The cuts hit hard at pensions and minimum wage levels in Greece and included cuts of 150,000 jobs over the next three years. See February 10, 2012 GEI News article for details.
The austerity budget and bailout money will combine with a private sector write down of 60% for the principal of Greek government bonds in a deal worked out last month in an effort to stabilize the country’s burgeoning debt to GDP ratio. (GEI News, January 30, 2012) The problem is, of course, that austerity will produce further reductions in GDP and the debt ratio may never reach the desired level as a result.
The picture below from the Financial Times shows the Greek people welcoming the action of their government.
The violence was widespread, according to the Financial Times:
George Kaminis, Athens mayor, said 17 buildings in the city centre – including five bank branches – had been set ablaze by extremists after violence erupted at an anti-austerity protest outside parliament.
Two central branches of National Bank of Greece and Eurobank EFG, both leading lenders, were also firebombed. Riot police firing teargas and stun grenades chased groups of hooded youths through the streets around parliament, and there were reports of looting of shops along Stadiou street, a central boulevard.
Violence spread to the islands of Corfu and Crete, the northern city of Thessaloniki and towns in central Greece, according to the Financial Times. Yahoo News (Associated Press) reported that 100,000 protesters marched in Athens; rioting was most severe in Volvos. Details from the Yahoo News report:
At least 45 businesses were damaged by fire, including several historic buildings, movie theaters, banks and a cafeteria, in the worst riot damage in Athens in years. Fifty police officers were injured and at least 70 protesters were hospitalized. Sixth-seven suspected rioters were arrested and a further 70 detained.
Looting of stores was widespread throughout Greece and many were injured but not hospitalized.
After the dust and smoke settles we may learn whether the EU will actually accept the budget that was passed. A proposal which involved this exact amount of cuts was rejected by the European finance ministers Friday morning (GEI News).
- Athens Passes Demanded Austerity Bill (Kerin Hope and James Wilson, Financial Times, 12 February 2012)
- Greece passes new austerity deal amid rioting (Nicholas Paphitis and Derek Gatopoulos, Yahoo News (Associated Press), 13 February 2012)
- EU Rejects Greek Austerity Plan (GEI News, 10 February 2012)
- Greece Solution Near? (GEI News, 30 January 2012)
Financial Times and Yahoo News articles are found on Econintersect Europe newspaper page.