Greece Faces Limited Austerity Choices

Posted June 28th, 2011 at 10:15 am (UTC-5)
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Greek lawmakers are faced with difficult options -imposing new taxes on minimum wage earners and selling state-owned assets – if the country is to avoid a default and collect a $17 billion share of last year's $156 billion bailout.

As workers walked off their jobs Tuesday to protest Prime Minister George Papandreou's latest austerity plan, the lawmakers weighed their limited choices.

Mr. Papandreou said they had a “patriotic duty” to approve his $40 billion austerity proposal calling for higher taxes and spending cuts by 2015.

The government's plan also calls for the sale of $71 billion in state-owned properties, a vast collection of assets that includes wide-body jets, a state lottery, old Olympic venues, stakes in a casino and electricity and gas monopolies.

But Mr. Papandreou's socialist government has only a five-seat majority in the 300-member parliament and some lawmakers and worker unions have voiced staunch opposition to various parts of his proposal, both the higher taxes and sale of specific assets.

Even as the Greek lawmakers debated the merits of Mr. Papandreou's plan, European officials warned Athens it had no choice but to approve the austerity measures to avoid calamity for the 17 nations that use the common euro currency and more broadly, for the world economy.

Europe's top economic official, Olli Rehn, said there was “no Plan B to avoid default.”

European Union President Herman Van Rompuy said the “coming hours will be decisive,” crucial for Greece, but also for the eurozone and the stability of the world economy.

French President Nicolas Sarkozy says French banks have agreed to help Greece overcome its debt crisis by stretching out most of their existing loans to the Greek government, which is trying to pass an austerity plan to avert bankruptcy.

Mr. Sarkozy said Monday his government has persuaded the banks to give Greece more time to repay 70 percent of private French loans that mature in the next three years.

Even if the Greek parliament approves the immediate Papandreou plan, Greece hopes to secure a second bailout, which he says would be about the same size as last year's.

The prime minister pleaded with Europe to give Greece the “time and the terms” it needs to pay off its debt without inhibiting its economic growth.

Some authorities say that the asset sale may prove particularly difficult because there may not be private ventures interested in owning the properties. Other obstacles abound, such as citizens opposed to private ownership of beaches and key utilities. Squatters have also taken over some properties the government hopes to sell and ownership of the properties is often uncertain.