ATHENS: Greek lawmakers Thursday approved an austerity budget, including 14 billion euros in spending cuts, as part of a tough economic overhaul imposed on Athens after it received an international bailout. The 2011 budget includes cuts in the badly mismanaged health sector and state-owned companies, an increase in the lower sales tax rate from 11 to 13 percent, a tax evasion crackdown, lower defense spending and a pensions freeze. Ahead of the vote, Prime Minister George Papandreou told parliament he was "determined" to make all the changes needed to pull the country out of crisis. "Despite the difficulties I am optimistic, Greece will not go bankrupt." While the Papandreou government's efforts to tackle Greece's debt crisis have won approval from international institutions, commentators say the country is far from being out of the woods. "The country will need to generate positive and significant primary surpluses over a number of years in order to facilitate a sustained (easing) of its public debt ratio," according to Platon Monokroussos, an economist at Eurobank. Monokroussos said the government would still need to reduce the size of the public sector if it really wants to bring debt levels under control. "A swift restoration of positive and sustainable economic growth and a more ambitious program for the privatization of state assets would also be instrumental for stabilizing debt dynamics and improve investor confidence." One of the major rating agencies, Fitch, said Tuesday it could downgrade its rating on Greece after a similar warning from another agency, Moody's, last week. Their warnings highlighted the challenges still facing Greece since the European Union and the International Monetary Fund agreed in May to a rescue package of 110 billion euros ($145 billion) to save it from default. In an assessment released last week, the IMF said it had been generally impressed by the government's recent moves. "After six months of intense reform efforts, there are signs that competitiveness is improving, helped by a slowdown in underlying inflation and wage growth," it said. "Budget measures implemented since the start of the program have reduced the deficit by an estimated six percent of GDP in 2010 alone." However, the protests on Wednesday ahead of the vote showed the scale of the opposition to the cuts in a country where the minimum wage is a mere 740 euros a month. Georges Daramas, of the anti-globalization pressure group Attac-Greece, said he feared that "a long period of sacrifices" lies ahead and questioned whether the government's strategy of cuts was ultimately sustainable. "We don't belong to those who say Greece has to stop paying its debt. But we (do) belong to those who say that long-term debt has to be restructured," he said. "The main problem is long-term debt. Seventy billion euros are to be repaid in 2014 and 75 billion in 2015 ... it is impossible, that's the main worry." He said the biggest headache was not how to repay the money owed to the EU and IMF but other existing loans. The EU-IMF money is released in installments conditional on Greece making progress in its reforms. Under the terms of the rescue, Greece agreed that its public deficit would be cut to 7.6 percent of GDP in 2011, aiming to eventually reach the EU limit of three percent. – Agence France
