Greece to vote on tough pension and salary cuts

Written by Associated Press | Athens (Greece) | Updated: Feb 29 2012, 05:59am hrs
Greek lawmakers are to vote on a package of tough salary and pension cuts on Tuesday as part of measures needed to secure the payout of the debt-ridden countrys second international package of bailout loans.

The parliamentary vote comes a day after the Standard & Poors ratings agency downgraded Greeces credit rating to selective default over a debt writedown deal with private creditors that is an integral part of the second bailout.

The downgrade had been widely expected, as ratings agencies had said the bond swap with private creditors would constitute a selective default. Once the swap is carried out next month, the agencies are expected to upgrade Greece.

The finance ministry said the S&P downgrade was pre-announced and all its consequences have been anticipated, planned for and addressed by the relevant decision of the European Council and the eurogroup. It added that the move had no impact in the Greek banking sector.

Greek Cabinet ministers were also meeting on Tuesday to approve a separate bill finalising details of previously passed cuts.

Lawmakers must push through the final bills before the country can receive any funds from its new euro 130 billion ($174 billion) package of rescue loans from other eurozone countries and the International Monetary Fund. The bailout and accompanying bond swap deal with private creditors aim to prevent the country from a potentially catastrophic default that could drag down other financially vulnerable countries and threaten the European Unions joint currency, the euro.

The rescue package is Greeces second in less than two years. The country has been surviving since May 2010 on funds from a first bailout from the euro zone and IMF, and has received euro 73 billion ($98 billion) from the initially approved euro 110 billion ($147 billion) package.

But more than two years of harsh austerity implemented to secure the rescue funds have taken a hefty toll on the Greek economy, with businesses closing in the tens of thousands and unemployment at a record high 21%. Unions have planned demonstrations in Athens on Wednesday as part of Europe-wide anti-austerity protests.