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Growing Dissent In Greek Coalition Ahead Of Austerity Vote

by Ulrika Lomas,, Brussels

05 November 2012

Two resignations by members of Greece’s Socialist PASOK party have increased the pressure on the beleaguered coalition government ahead of next week’s crucial vote on austerity measures.

The resignations by Michalis Kassis and former health minister Mariliza Xenogiannakopoulou have reduced the government's majority, but more importantly are seen as an indication of the wavering resolve of PASOK to continue supporting the reforms proposed by the conservative-led coalition. In a letter to the party leadership Xenogiannakopoulou writes: “A progressive, historic and radical party has turned itself into a small department of the political centre-right, having adopted its neo-liberal values and choices”.

The resignations come the day after an unexpectedly narrow government victory in parliament over a law giving the government greater flexibility to privatize the country’s public utility companies. Several members of the PASOK party abstained from the vote.

Prime Minister Antonis Samaras must succeed in forcing through the EUR13.5bn (USD17.5bn) package of spending cuts and tax increases over two years if he is to receive the bailout loans required to pay a bond redemption on November 16. Eurozone ministers have urged Greece to sort out “remaining issues” before it can receive the EUR31bn aid installment. A failure by Greece to pay the bond redemption would result in a debt default and a possible exit from the eurozone.

The full extent of Greece's worsening debt burden became apparent when a revised budget for next year was submitted to parliament on Wednesday. The economy is forecast to contract by 4.5% in 2013, instead of the 3.8% contraction foreseen at the start of October.

The ratio of debt to gross domestic product (GDP) is now forecast to reach 189.1% in 2013 rather than the earlier figure of 179.3%. The budget deficit as a percentage of GDP next year is now expected to be 5.2% rather than the 4.2% forecast a month ago.

In further bad news for the government, more than a thousand police officers, coast guards and fire service personnel joined a rally in Athens on Thursday to demonstrate against government cuts. A two-day general strike is planned for Tuesday and Wednesday next week.

TAGS: tax | economics | fiscal policy | budget | Greece

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