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Greek parliament passes 'tough' budget

December 6, 2015

Greece's leftist-led parliament has passed a 'tough' 2016 budget comprising deep spending cuts and tax hikes. The approval follows July's massive and contentious economic bailout facilitated by the European Union.

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Griechenland Parlament Abstimmung
Image: picture alliance/NurPhoto/P. Tzamaros

Prime Minister Alexis Tsipras' leftist government narrowly secured budget approval early Sunday. Lawmakers voted 153 in favor and 145 against, during the late-night session.

In the vociferous debate, Finance Minister Euclid Tsakalotos said nobody could cheer for "this tough budget" shaped by the unpopular terms of the third EU-led rescue package for Greece, which was agreed with international lenders in July.

The approved budget makes 5.7 billion euros ($6.2 billion) in spending cuts and gathers 2 billion euros in higher taxes. The cuts include 1.8 billion euros from pensions and 500 million from defense.

Symbolbild - Premierminister Tsipras
Budget's passage was "difficult," says TsiprasImage: Getty Images/AFP/L. Gouliamaki

There have been strikes by public and private workers over the austerity and restructuring reforms sought by the EU as part of the financial bailout aimed at keeping Greece in the eurozone.

Greece's debt is forecast to grow to 327.6 billion euros or 188 percent of gross domestic product (GDP) from 180 percent in 2015.

'Difficult exercise'

Tsipras, who came to power in January promising to defend Greeks from EU-imposed cuts and was then re-elected in September, described the budget's passage as a "difficult exercise."

"Behind the numbers, anybody can see the agonizing effort to support the working classes," he said Sunday, referring to monthly pension cuts.

His coalition's majority had shrunk during the debate when two lawmakers quit over measures to facilitate foreclosures against people who cannot pay their mortgages.

The opposition right-wing New Democracy party's interim leader Yiannis Plakiotakis described the budget as "socially unfair" and "anti-growth."

"They are getting ready to turn the pensions into tips," he quipped bitterly.

Contraction forecast

The approved 2016 budget foresees a 0.7 percent contraction of the Greek economy in 2016, but less than the 2.3 percent forecast previously.

A revised forecast for 2015 showed near zero growth as the debt-ridden nation endures its sixth year of austerity.

Banks shored up

On Friday, the European Commission announced that the National Bank of Greece (NBG), one of the country's largest lenders, was to be shored up with 2.7 billion euros. The deal was coupled with restructuring requirements.

The NBG agreement is part of the 86-billion-euro bailout granted to Greece by international lenders, including the EU earlier this year.

This set aside 10 billion euros to recapitalize Greece's four largest banks. Half of this has been used so far.

EU Economy Commissioner Pierre Moscovici said two banks, Alpha Bank and Eurobank, had covered their capital needs via "private sector participation."

A fourth Greek institution, the Piraeus Bank, had needed 2.7 euros in bailout assistance.

EU Competition Commissioner Margrethe Vestager said the banks could now "refocus on lending to Greek businesses" to support economic recovery.

ipj/jm (dpa, APF, AP)