Thursday, December 23, 2010

Greece approves 2011 austerity budget

Financial Times
December 23, 2010

The Greek parliament approved an austerity budget early on Thursday that aims to slash the country’s deficit to 7.4 per cent of GDP in 2011 from a projected 9.6 per cent in 2010.

The budget was passed to secure future disbursements from the €110bn EU-IMF package and contains tax rises and spending cuts, amounting to €14bn ($18.3bn).

The austerity measures include rises in the middle and lower value added tax rates to 13 per cent from 11 per cent and 6.5 per cent from 5.5 per cent respectively and some minor tax relief for the tourist industry and the retained corporate earnings, a pension freeze, cuts to health spending and the ministries.

Greece was hit by a general strike on Wednesday but the budget passed as expected as the ruling PASOK socialist party commands a comfortable majority of 156 in the 300-seat parliament.

But economists, such as EFG Eurobank’s Gikas Hardouvelis and Nomura’s Dimitris Drakopoulos, say the government still faces important challenges.


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