Greece to vote on 2011 austerity budget

Greek Prime Minister George Papandreou speaks to media before the EU summit at the European Council headquarters in Brussels on December 16. Greek lawmakers on Wednesday wrap a five-day debate on a budget containing over 14 billion euros in savings under a tough austerity policy imposed after the country's bailout by the EU and the IMF.

Riot policemen stand in front of the Greek parliament in Athens during a demonstration on December 6. Greek lawmakers on Wednesday wrap a five-day debate on a budget containing over 14 billion euros in savings under a tough austerity policy imposed after the country's bailout by the EU and the IMF.

AFP - Greek lawmakers on Wednesday wrap a five-day debate on a budget containing over 14 billion euros in savings under a tough austerity policy imposed after the country's bailout by the EU and the IMF.

The Socialist government of George Papandreou has a six-seat majority in parliament and is expected to carry the vote to be held after midnight.

The 2011 budget includes cuts in the badly mismanaged Greek health sector and public companies, a two-percent increase in the lower sales tax rate from 11 to 13 percent, a tax evasion crackdown, lower defence spending and a nominal pension freeze.

But the strain of the fiscal correction after decades of profligacy has exposed deep strains in the ruling Pasok party, with many prominent lawmakers now publicly questioning a strategy that has plunged Greece into recession.

With thousands of jobs already lost, wages cut and prices climbing from tax hikes, the country's influential unions have hit back with a wave of strikes and street protests.

Public transport in the capital was paralysed on Wednesday by a 24-hour strike in state-owned bus, trolley and metro companies -- the fourth this month -- by disgruntled staff facing further wage cuts.

The leading public and private-sector unions are also staging a three-hour work stoppage and demonstrations in Athens later in the day.

The cost-cutting has been mandated by the European Union and the International Monetary Fund which in May extended Greece a 110-billion-euro (145-billion-dollar) loan when the country came close to bankruptcy.

The money is released in instalments conditional on Greece making progress in its reforms.

Under the terms of the rescue, Greece agreed that its public deficit would be reduced to 7.6 percent of Gross Domestic Product in 2011, aiming to eventually reach the EU limit of three percent.

But additional measures became necessary after the 2009 public deficit was revised upwards last month to 15.4 percent of GDP from the previous 13.6 percent by Eurostat, the EU statistics agency.

The resulting effect is that the 2010 shortfall will now be 9.4 percent of output, above the 8.1 percent target.

Accordingly, Athens has had to find extra savings to keep its finances on track to meet the 2011 target.