Greece speeds up budget debate amid euro turmoil

By Nicholas Paphitis

Associated Press

Published: Friday, Dec. 2 2011 12:11 p.m. MST

Greek Prime Minister Lucas Papademos, left, greets Bank of Greece governor George Provopoulos during a meeting at the prime minister's official residence in Athens, on Friday, Dec. 2, 2011. Lawmakers are due later Friday to begin a debate on the 2012 austerity budget, that includes tough debt-reduction targets demanded by the country's rescue creditors.

Petros Giannakouris, Associated Press

ATHENS, Greece — Greece's new coalition government has sped up plans to pass a 2012 austerity budget, hoping to press ahead with tough debt-reduction talks despite the financial turmoil threatening the eurozone.

Lawmakers Friday began a debate on the budget a day earlier than initially planned — maintaining deep cuts to slash the budget deficit from an estimated 9 percent of gross domestic product this year to 5.4 percent in 2012.

Recent cuts introduced include a draconian new property tax that would lead to households' electricity being cut off if they delay payments.

Prime Minister Lucas Papademos ruled out scrapping the tax, describing it as "absolutely necessary." He did, however, promise greater relief to those unable to pay.

The budget, which will see Greece suffer a fourth year of recession in 2012, is to be voted on Dec. 6.

Europe's single currency is facing it's biggest crisis since going it went into circulation in 2002, with borrowing costs rising in Italy and Spain, and Greece, Portugal and Ireland already surviving on emergency loans.

France and Germany are pressing for tougher fiscal oversight across the eurozone ahead of a Dec. 9 summit of European leaders, as the crisis poses a threat to other major world economies.

United States Vice President Joe Biden, currently visiting Turkey, is due to meet Papademos in Athens Monday.

Greece fears Europe's escalating crisis could affect its own efforts to negotiate a massive second bailout deal worth €130 billion ($175.6 billion).

The new deal hinges on plans for 50 percent writedowns on the value of Greek bonds held by private creditors, who will be offered bonds from a European rescue fund. Negotiations on the large number of details involved in that deal are expected to extend for several weeks into the new year.

Papademos, the former No. 2 at the European Central Bank, described the talks as "broad and complex," but added "It would not be useful to make public any details that concern these negotiations."

Unions staged a general strike against the new budget this week , arguing that it continues to place an unfair burden on low-income and middle class Greeks.

"Unfortunately, the new budget contains additional burdens that exceed €11 billion. Six billion of that will come from cutting expenses — that means salaries, pensions, and health care," Ilias Iliopoulos, general secretary of the public sector union ADEDY, told AP television Friday.

A Greek high court, meanwhile, considered class-action appeals against the new property tax that could leave thousands of households without power this winter.

As the hearings opened, several hundred protesters gathered outside the Council of State in Athens and chanted "We won't pay!"

Papademos' coalition, backed by the majority Socialists and main rival conservatives, is expected to call early elections in late February.

AP television producer Theodora Tongas contributed.

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