AMID RIOTOUS scenes on the streets, the Greek parliament yesterday passed a fresh round of austerity and privatisation measures, ending the possibility of the debt-troubled nation defaulting over the summer.
The so-called second memorandum, as the swingeing mid-term austerity plan is popularly known, involves €28 billion in tax hikes and spending cuts over the next five years and a €50 billion privatisation programme.
The vote – 155 in favour and 137 against – was the first of two knife-edge votes for the Greek prime minister, George Papandreou, this week. The second, to be voted on today, is a series of laws on how the measures will be implemented.
The vote was greeted with considerable relief in Brussels. There had been fears that any negative outcome would spark a cascade of turmoil in euro zone and global markets, with unpredictable consequences.
European Council president Herman Van Rompuy and EU Commission chief José Manuel Barroso said Greece had taken a “vital step back” from a grave default scenario.
German chancellor Angela Merkel said yesterday’s vote was “really good news”, adding that the decision was “brave as well as necessary”.
However, she criticised the Greek opposition for voting against the package. “I find it especially regrettable that the Greek opposition is not supporting the reform package,” she said.
Mr Papandreou’s European counterparts have warned that the payment of the next €12 billion tranche under Greece’s existing bailout mechanism, as well as the setting up of a new bailout package worth €120 billion, were conditional on the second tranche of legislation being passed.
Mr Papandreou told parliament ahead of yesterday’s vote: “Now is the time to rise to the historical challenge, look to the future and secure it for the next generations.
“There is no plan B for Greece. There are no magic solutions. Things are simple: we can either follow the rough path of change or be met with disaster,” he continued.
Speaking shortly before him, his new finance minister, Evangelos Venizelos, characterised many of the measures as unfair, but insisted they were absolutely necessary.
In his contribution, Antonis Samaras, leader of the conservative New Democracy Party, said parliament was not “deciding on whether Greece will collapse or not, but whether we will make yet another fateful step towards absolute economic, social and political collapse”.
The vote, which took the form of an open roll-call, followed predictable party divisions, with 154 Socialist Pasok MPs and one MP from the conservative New Democracy voting for the measures.
Only one of the four Pasok MPs who had voiced opposition to the law before the debate followed through on his threat to vote against it.
With difficult talks looming on a second international bailout for the country, officials still fret that Mr Papandreou’s administration will encounter further difficulty as it seeks to execute the austerity measures in the months ahead.
The crisis in Greece has stoked fears in Dublin and beyond that it could hamper Ireland’s return to private debt markets.
The response to the vote on sovereign debt markets was positive yesterday, with notional Irish borrowing costs easing a little and borrowing costs of heavily indebted countries such as Spain and Italy declined.
The political uncertainty in Greece has weighed heavily on Irish debt, with the interest rate on 10-year bonds spiking over 12 per cent in recent days to reach new records. The interest on such bonds fell to 11.72 per cent yesterday from 11.85 per cent a day earlier.
Separately, a German government source said finance minister Wolfgang Schäuble will meet today with German bank leaders to discuss their involvement in the second Greek bailout.
The talks, ongoing for days, follow an outline deal in which French institutions agreed to extend the maturity of some Greek debt for up to 30 years. “We’re reasonably optimistic,” said the Berlin source of the prospect of German banks taking part.