Greece passes austerity budget

The Greek parliament passed an austerity budget Thursday aimed at cutting the country's high deficit by boosting taxes and slashing spending.

It also restricted salaries and new appointments in the public sector.

The passage followed five days of debate. All 160 members of the Socialist government approved, while 139 from four opposition parties opposed it.  One deputy was absent.

Greece has been under pressure from the markets and from the European Union to reduce its budget deficit from a projected 12.7 per cent of gross domestic product in 2009 to below 9.4 per cent next year, and as low as 8.7 per cent if further cuts are successfully implemented.

The EU requires deficits to stay below three per cent for countries using the euro, something Prime Minister George Papandreou has promised to achieve by the end of his four-year term.

"We can't take Aspirins to deal with this problem ... We have to change course," Papandreou told parliament. The prime minister, who won election in October, blamed Greece's problems on corruption, tax evasion and government waste.

Three international ratings agencies downgraded Greek bond ratings this month. Papandreou has promised to bring the deficit to below the three per cent level required for countries that use the euro by the end of his four-year term. According to the budget, the national debt is set to reach $464 billion US next year, while GDP in 2010 is estimated at $348.6 billion.

'There is no margin for error.' —George Papaconstantinou , Greek Finance Minister

"There is no margin for error. The only margin there is is to improve our targets, and that is why we ... are aiming for a four-point reduction in the deficit," Finance Minister George Papaconstantinou said.

Austerity measures include a freeze in public sector hiring and 10 per cent cuts in social security and government operating expenditures.

Opposition parties warned that the spending cuts could further fuel unemployment, which is now at a four-year high of 9.3 per cent.