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Greek lawmakers rush to clear promised austerity

By Nicholas Paphitis

Associated Press

Published: Wednesday, Feb. 22 2012 4:30 a.m. MST

Greek Finance Minister Evangelos Venizelos speaks during a news conference in Athens, Tuesday, Feb. 21, 2012. Greeks greeted uneasily the news on Tuesday that their country will likely avoid defaulting on its debts next month and the euro should remain their currency, but at the cost of years of economic hardship.

Thanassis Stavrakis, Associated Press

ATHENS, Greece — Greece scrambled Wednesday to adopt a batch of emergency laws that will further cut incomes and government spending, while revising deficit estimates higher, a day after securing a new bailout and debt relief deal designed to stave off bankruptcy.

The new austerity measures demanded by creditors in return for the rescue loans follow two years of deepening misery, with the Greek economy in freefall and unemployment at a record high. Angry unions have called two separate protest rallies outside Parliament in the afternoon.

On Tuesday, the 17-country eurozone approved Greece's second financial lifeline in less than two years, worth €130 billion ($172 billion), and agreed to impose a €107 billion ($141 billion) debt writedown on banks and other private holders of Greek bonds.

Without either deal, the country would have defaulted on its debts next month, and would likely have been forced out of the common European currency it joined in 2001. But the price of salvation for ordinary Greeks is only just starting to sink in.

Legislation tabled in Parliament late Tuesday outlines a total €3.2 billion ($4.2 billion) in extra budget cuts this year agreed by the Cabinet last week.

The measures include nearly €1 billion ($1.3 billion) in cuts to already depleted pensions. Health and education spending will be reduced by more than €170 million, while subsidies to the state health care system will be cut by €500 million. Some €400 million will be lopped off defense spending — three quarters of which will come from purchases.

The draft law also drastically revises the 2012 budget, changing the deficit target to 6.7 percent of gross domestic product from an initial forecast of 5.4 percent. Even worse, plans for a modest primary surplus — which excludes debt servicing costs — have been scrapped and Greece will instead post a primary deficit of nearly €500 million, or 0.2 percent of GDP.

Parliament is expected to vote on the cuts and budgetary revisions early next week.

On Wednesday, debate will start at committee level on a separate draft law on adopting the private debt writedown. Parliament's plenary session will vote on the draft law Thursday.

Both pieces of legislation are expected to be approved, as the interim governing coalition headed by technocrat Prime Minister Lucas Papademos controls 193 of the House's 300 seats. But earlier this month the two coalition partners — the majority Socialists and the conservatives — were forced to expel a total 43 deputies who rebelled against new austerity cuts.

Angry unions have called a protest rally against the new belt-tightening for 4:00 p.m. outside Parliament. Communist supporters will hold a separate march an hour later, while other protesters are planning a motorcycle rally. Previous protests have turned violent, and rioters burnt and looted dozens of shops in central Athens during a rally on Feb. 12.

Papademos, who is unelected, has a sole mandate to see through the twin bailout and debt relief deal, and is expected to step down by early April ahead of national elections. Polls show that conservative New Democracy would likely come first, but without a large enough majority to govern alone.

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