Greece approves new austerity package amid downgrade threats

City A.M. Reporter
GREEK lawmakers last night approved a 2011 austerity budget that imposes yet more cuts on the nation, hours after thousands took to the streets shouting “We can’t take it anymore.”

The bill targets a budget deficit of 7.4 per cent of GDP next year, down from about 9.4 per cent this year, through more spending cuts and tax increases. This would put Greece in line with the terms of the bailout that saved it from bankruptcy in May.

“We will do whatever it takes to succeed,” Prime Minister George Papandreou told lawmakers just before the vote. “We will change this country.”

Public transport ground to a halt in the capital yesterday as about 3,000 protesters rallied peacefully in front of parliament against wage cuts in the public sector and other steps aimed to stem the crisis that has shaken the Eurozone.

The new spending cuts and tax rises in next year’s budget build up on an estimated six percentage points reduction of deficit in 2010.

But Greece is still set to miss its 2010 fiscal targets and the measures have failed to calm fears about its ability to pull itself out of crisis.

Five Greek banks were told yesterday by Fitch Ratings that their credit rating could be downgraded to junk status, a day after sovereign ratings were put under the same watch.

The move would bring Fitch’s ratings in line with Moody’s and Standard & Poor’s, which already have sub-investment grade ratings on the country, and both are on review for further downgrades.

Greek 10-year bonds fell 0.198 in price to bid 67.367, yielding 12.217 per cent. The spread of Greek bonds over German bunds widened slightly to 9.26 per cent.