Parliament ratifies 3.2 billion euro spending cuts

Greece’s Parliament ratified a 3.2 billion-euro package of spending cuts to the 2012 budget, taking Prime Minister Lucas Papademos one step closer to the country securing a rescue package to avert financial collapse. A total of 202 lawmakers voted in favor of the law and 80 against, Acting Parliament Speaker Grigoris Niotis said in remarks carried live on state-run Vouli TV on Tuesday after a roll-call vote. The vote is to be followed Wednesday by another that legislates permanent changes to pension funds and health-care spending, measures demanded by the European Union and International Monetary Fund in return for the 130 billion-euro lifeline. European governments moved toward a second rescue of Greece on Feb. 21, calculating that the cost of a fresh bailout, which includes a writedown of about 100 billion euros of Greek debt, is a price worth paying to prevent a financial collapse that could shatter the euro area. “Things are and will be difficult,” Finance Minister Evangelos Venizelos told the chamber before the vote on Tuesday.

“Now we are gaining a safe framework with the decisions of Feb. 21, with private-sector involvement, recapitalization of banks but it needs work, work, work, unity, consensus, seriousness.” Spur the economy Papademos, scheduled to see European Commission President Jose Barroso&?nbsp;on Wednesday&?nbsp;to discuss how the EU can help spur the Greek economy back to growth, met with his ministers before the vote to adopt a decree on the cuts to wages and pensions, measures that while cutting state spending may also drive the economy deeper into recession. The economy shrank 6.8 percent last year and is set to contract for a fifth year this year. Yesterday’s bill will cut 12 percent off the amount exceeding 1,300 euros for those receiving pensions from the state, trimming wages for all state employees, including a 10 percent cut for the police and fire department. The minimum wage will be cut 22 percent. Unions plan protests on Wednesday, part of a European-wide campaign against austerity measures that will include demonstrations in Madrid and Lisbon.

In Greece, unions will hold a three-hour work stoppage from noon and plan to picket the European Commission offices in Athens at 1:30 p.m. Firemen, police Firemen and policemen marched through the city center on Tuesday, wearing their uniforms, decrying a cut in wages that they say will mean a monthly wage of 585 euros.

Antonis Samaras, the leader of New Democracy, the second- biggest party and leading in opinion polls, repeated his call for elections to be held as soon as the financing package is wound up. “With this new loan agreement, with this drastic cutting of the debt, we have averted the country’s explusion from the euro,” he told the chamber. “Opening the road to elections, we have saved social cohesion, at least for now.” In the most recent vote on austerity measures, Greek lawmakers on Feb. 13 passed budget cuts as rioters set fire to almost 50 buildings amid violent street protests. Standard & Poor’s (SPY) cut Greece’s credit ratings to “selective default” on Feb. 27 after the country began the biggest sovereign debt restructuring in history, a key element to the second bailout. S&P dropped Greece’s rating from CC, two levels above default, after the government added clauses to its debt designed to coerce investors unwilling to take part in the exchange, the New York-based company said.

The downgrade follows a reduction last week by Fitch Ratings to C. Moody’s Investors Service has said it will cut the nation to its lowest rating. The debt exchange aims to reduce national debt to 120.5 percent of gross domestic product by 2020, from 160 percent last year, and to meet the terms of the 130 billion-euro international bailout. The agreed-upon swap, known as private- sector involvement, will slice about 100 billion euros off more than 200 billion euros of privately held debt if all investors participate. [Bloomberg] - 

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