ATHENS, Greece — Greek lawmakers begin debating new austerity plans Monday that must pass this week if the debt-ridden country is to receive the critical next installment of loans from its international bailout plan and avoid default.
The deeply unpopular spending cuts and tax hikes in a midterm austerity bill and an additional implementation law are expected to be voted on in parliament on Wednesday and Thursday. They must be passed for the European Union and International Monetary Fund to release the next €12 billion batch of loans from the €110 billion bailout.
Without those funds, Greece runs out of money in mid-July and faces becoming the first eurozone country to default on its debts — a potentially disastrous event that could drag down European banks and affect other financially troubled European countries.
"The €12 billion of this fifth installment is absolutely essential to service the cash needs of the public sector, which is in reality the servicing of citizens' immediate and vital needs," Finance Minister Evangelos Venizelos said over the weekend.
Prime Minister George Papandreou's Socialist party has a five-seat majority in the 300-member parliament, so should be able to pass the bills. However, Papandreou has faced an internal party rebellion over the measures, and at least two deputies have said they are considering not voting in favor.
Venizelos was meeting with the deputies in an effort to find a solution. He was also discussing with international creditors how to plug a €600 million shortfall in this year's budget, which could see extra measures included in the bills.
The rebellion peaked in a political crisis earlier this month that almost led to a government collapse as Socialist deputies began resigning their parliamentary seats and cross-party talks to create a coalition government with the conservative opposition collapsed. Papandreou faced down the revolt and bought time with a broad cabinet reshuffle in which he replaced his finance minister.
The main opposition Conservative party leader, Antonis Samaras, has withstood intense pressure from European officials to lend his backing to the bills. While he supports certain cost-cutting measures and privatizations, he says the overall thinking behind the €28 billion midterm austerity bill is flawed and he will vote against it.
The new austerity plan runs two years beyond the current government's mandate to 2015 and will see increases to consumer and heating fuel taxes and a drop in the minimum limit for income tax, to €8,000 a year from €12,000.
The measures have already sparked widespread protests. Workers are to hold a 48-hour general strike on Tuesday and Wednesday, while groups of protesters who have been camped out in the capital's main Syntagma Square have vowed to encircle the parliament building on Wednesday to prevent lawmakers from entering the building and voting on the austerity bill.
"I know very well that the measures in the midterm fiscal program and the implementation law are heavy and in many parts unfair," Venizelos said, but added they were essential if Greece is to continue receiving its rescue funds.
Ahead of the general strike, a communist party-backed union, PAME, held a protest at Greece's most famous ancient site, the Acropolis, hanging banners in English and Greek over the monument's walls reading: "The peoples have the power and never surrender. Organize counterattack."
"It's a symbolic act by PAME," said activist Giorgos Peros. "We want to show to all the people of Europe and Greece that people don't surrender to the desires of the monopolies, multinational corporations, big capital, the government, the IMF and the EU."
Under Greece's original bailout, from which it began receiving funds in May last year, Greece had been expected to be able to return to borrowing on the international bond market next year. But persistently high interest rates demanded for its bonds have essentially locked it out of that market, and it has become clear the country will need more help.
European leaders are currently discussing a second bailout, which Papandreou has said will be roughly the same size as the first one, and which could include the voluntary participation of private banks which would agree to roll over Greek bonds they hold.