Greek lawmakers have approved a 2012 budget pledging tough fiscal goals demanded by EU partners in return for fresh loans after clashes broke out between protesters and police outside parliament.
A broad majority of the parties backing Lucas Papademos' caretaker administration secured the economic blueprint's passage by 258 votes to 41, the assembly said after the vote that concluded after midnight last night.
Papademos had earlier described the budget as a key first step in a process to reverse disastrous fiscal policies that have burdened each Greek with over €30,000 in state debt.
"Our actions will determine the country's economic future, not only for 2012 but for the entire decade," said Papademos, who took over last month with the task of ratifying a key euro zone debt deal and holding early elections.
The PM, a former European Central Bank deputy chief, also insisted that Greece's position in the European Union and the euro was "non-negotiable". "Our place in Europe is non-negotiable. The Greek people will defend it in every way possible," Papademos said.
"Europe and our common currency remain, despite the crisis, one of the noblest achievements of recent history," he added.
The government had warned during the budget debate that the stakes could not be higher for the country amid a debt crisis which has upended the economy and threatened the euro zone despite the best efforts of the EU, IMF and Athens to stabilise its finances.
Greece's economy is expected to contract by 2.8% of output next year in a fifth straight year of recession. A leading labour expert warned yesterday that years of hardship lay ahead. "The Greek population will undergo ten years of enormous sacrifice," Savvas Robolis, director of the labour institute of main Greek union GSEE, told AFP. "This austerity policy has led to an absolute impasse," he said.
The vote could not come at a more sensitive time for the euro zone after Standard & Poor's warned it could cut its credit ratings on the bloc, throwing another twist into the debt crisis.
Germany and France are leading the charge for major change in the way the bloc is run to ensure much tighter fiscal oversight from Brussels and reacted sharply to S&P yesterday, saying they would push ahead with the needed reforms.
An EU summit tomorrow and on Friday is intended to agree deep institutional changes to stop the debt crisis which has pushed Greece, then Ireland and Portugal into EU-IMF debt bailouts and now threatens Italy and Spain.
The key issue for Greece is implementation after it missed deficit and debt targets laid down in a first EU and IMF rescue in May 2010 and was then forced to seek more help as the economy slumped.
A second accord agreed in late October requires Greece to adopt even tougher austerity measures in return for new funding of €100 billion and a controversial debt write-down deal with creditor banks worth €100 billion. The accord also makes available €30 billion to help local banks cover the losses on their holdings of Greek government bonds caused by the 50% bond write-down.
The budget puts the public deficit at 5.4% of gross domestic product (GDP) in 2012, down from 9% this year, compared with the EU ceiling of 3% and the previous forecast for next year of 6.8%.
