Greek Parliament set to approve new bailout deal

By Nicholas Paphitis

Associated Press

Published: Tuesday, March 20 2012 6:55 a.m. MDT

A laborer carries a bench in the central Athens district of Gazi, Tuesday, March 20, 2012. Greece's Parliament is set to approve the debt-crippled country's new international bailout deal late Tuesday as Communist party supporters prepare to protest against the austerity measures being imposed in return for the rescue funds. The euro 172 billion ($226 billion) rescue package has already been approved at committee level.

Thanassis Stavrakis, Associated Press

ATHENS, Greece — Greece's Parliament is set to approve the debt-crippled country's new international bailout deal late Tuesday as Communist party supporters prepare to protest against the austerity measures being imposed in return for the rescue funds.

The rescue package, which combined with a first bailout will reach €172 billion ($226 billion), has already been approved at committee level. It is expected to pass easily in the 300-seat house with the support of the majority Socialists and conservative New Democracy, coalition partners in the government headed by former central banker Lucas Papademos.

The Communists and other left-wing opposition parties oppose the agreement, which they say will further increase suffering for ordinary Greeks.

Formed in November, the government was tasked with saving Greece from looming bankruptcy by securing the new bailout and seeing through a massive writedown of the country's privately held debt.

That mission will be completed in weeks, after which Papademos will call national elections. The Socialists will head into the election under the new leadership of Evangelos Venizelos, who resigned as finance minister Monday after being elected to the party leadership the previous day.

The government is expected to announce a new finance minister, but has refused to specify when.

Despite the new bailout, a debt sustainability analysis by the International Monetary Fund, the European Commission and the European Central Bank warned that Athens may still be unable to implement reforms at the necessary pace.

The report obtained by The Associated Press on Tuesday said the program's balance of risks is leaning toward the downside scenario which would see debt falling to only 145.5 percent of national income by 2020 even after taking into account the recent losses accepted by private holders of Greece's bonds.

The aim of the bond swap that will erase more than €100 billion ($131.5 billion) from Greek debts held by banks, pension funds and other private investors, was to reduce the debt-to-GDP ratio to 120.5 percent in 2020 — from the current 169 percent.

While sky-high interest rates prevent Greece from raising cash through bond issues, the country is keeping a market presence through regular short-term debt auctions.

On Tuesday, the public debt management agency said borrowing costs dropped in a new 13-week treasury bill auction that raised €1.3 billion ($1.71 billion), with the country paying 4.25 percent compared to 4.61 percent last month.

So far, keeping Greece afloat has come at a high cost for the country's citizens, who have already seen their standard of living reduced by two years of austerity.

Greece has been dependent on a first €110 billion ($144.7 billion) since May 2010. In return for the second bailout, already depleted pensions and salaries have been further cut, while the government pledged to abolish 15,000 public sector jobs this year.

Athens has also committed to raise €19 billion ($25 billion) by 2015 under an open-ended €50 billion ($65.7 billion) program to privatize or develop state property.

On Tuesday, authorities launched an international tender to develop 186 hectares of coastal land, including a golf course, on the resort island of Rhodes. A similar process is under way for land on the island of Corfu.

The widely resented cutbacks have been compounded by a flurry of tax hikes, as authorities failed to adequately address rampant tax evasion and incompetent tax collection.

Labor unions have reacted with a string of strikes and protests.

Greek ferry crews have been on strike since Monday and their union will decide following talks with government officials Tuesday whether to go ahead with planned rolling 48-hour strikes. If protracted, the disruption will harm Greece's vital tourism industry while leading to shortages of basic consumer goods on small islands and halting key shipments of agricultural produce from Crete, the country's biggest island.

Staff at the state Sotiria hospital in Athens also walked off the job Tuesday to protest the planned merger with a neighboring hospital, while lawyers in many parts of the country launched a two-day strike.

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Juergen Baetz in Berlin contributed.

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