Fragile Coalition in Greece Narrowly Backs Austerity

ATHENS — Amid some of the most violent demonstrations in Greece in months, the Parliament approved a sweeping set of austerity measures early Thursday that were aimed at keeping the country in the euro zone, but passage was so narrow that the government’s continued stability remained at risk.

After 14 hours of debate, the three-party coalition of Prime Minister Antonis Samaras held together to pass the measures, 153 to 128, after several lawmakers broke ranks. Eighteen members voted present, the equivalent of a blank vote, including 15 from the smallest coalition party, Democratic Left, which opposes the measures. There was one abstention.

After the vote, six lawmakers were expelled from the governing coalition’s Socialist Pasok party and one from the conservative New Democracy party

The measures — including sharp cuts to pensions, salaries and social services, as well as tax increases and increases in the retirement age to 67 from 65 — are expected, but not guaranteed, to persuade Greece’s foreign creditors to unlock 31 billion euros in aid, or about $40 billion, that the country needs to meet expenses.

A vote on the 2013 budget to activate the austerity package is expected late Sunday.

In presenting the austerity measures, which total 17 billion euros, to Parliament, Mr. Samaras acknowledged that the new cuts to pensions and salaries were “unfair,” but added that Greece was bound by the terms of its agreement with creditors.

“A lot of what we’re voting on today are measures we should have taken a long time ago,” he said, adding that they would be “the last, the last” such cuts. Future “adjustments,” he said, would come from a crackdown on tax evasion and public sector waste.

Mr. Samaras, however, is the third prime minister to promise the “last cuts” since Greece asked for a foreign bailout in 2010. The deep cuts, which have helped Greece’s economy shrink 25 percent in recent years, are undermining the country’s social and political stability — and the government’s ability to carry out the structural changes.

“You can’t rebuild institutions when you’ve cut down the salaries of people who work for them,” said Alexis Papahelas, the managing editor of the Kathimerini daily. “That’s the big problem the government and the country are facing.”

On the eve of the vote, nearly 50 employees of Greece’s central bank resigned to protest the deep cuts to public sector salaries, while on Wednesday, Greece’s Supreme Court ruled that cuts of up to 30 percent in judge’s salaries would violate the constitution.

Parliamentary staff also threatened Wednesday to resign over their salary cuts, leading Mr. Samaras to consider invoking executive authority to force them to stay on the job, according to a government official not authorized to speak publicly.

Greece’s troika of foreign lenders — the European Commission, European Central Bank and International Monetary Fund — have demanded that Greece reduce its budget deficit in exchange for more aid.

Yet few believe that the measures will help improve the country’s economic health.

“Telling a whole people that they have to commit collective suicide to save the debt is not a policy,” Zoe Kostantopoulou, a member of Parliament from the leftist Syriza opposition party, said in an interview, expressing a sentiment growing across the political spectrum.

“The reason why we’ve seen the economy implode much more rapidly than thought is that they grossly underestimated the impact that fiscal austerity of this magnitude would have on the Greek economy,” said Simon Tilford, the chief economist at the Center for European Reform in London. “Additional austerity is going to compound that weakness.”

He added that the slump in the economy was also making it harder for Greece to meet the troika’s demands to reduce a mountain of debt. “The whole strategy for Greece has failed,” Mr. Tilford said. “It’s led to collapse in the Greek economy and the ballooning of debt so it’s an abject failure.”.

Stella Dimitrakopolou, a 29-year-old graphic designer who donned a surgical mask to ward off tear gas in Wednesday’s demonstration, agreed.

“These measures are inhumane,” she said. “The young generation has no future, and older people have no money and the measures do not help society economically.”

Greece Broke?

Over the last decade, Greece went on a debt binge that came crashing to an end in late 2009, provoking an economic crisis that has decimated the country’s economy, brought down its government, unleashed increasing social unrest and threatened the future of the euro.

Since a change in government revealed the true size of the country’s massive deficits, Greece has been kept afloat by its fellow euro zone countries, but at a steep price: the austerity measures demanded by France and Germany in return for two massive bailout packages, totaling 240 billion euros, have ripped holes in the Greek safety net and plunged the country into a recession of near-Great Depression dimensions.

After long resisting the idea of a default, European officials in March 2012 helped Greece negotiate a landmark debt restructuring deal with the vast majority of its private sector lenders, who agreed to swap $77 billion in Greek debt for new bonds worth as much as 75 percent less. It was the largest default in history.

The deal cleared the way for the so-called troika — European Commission, the European Central Bank and the International Monetary Fund — to begin releasing funds from the second, 130 billion euro ($163.4 billion) bailout package, avoiding an uncontrolled default. But many economists said it still left Greece saddled with unsustainable debts and little prospects for growth.

While Greece received billions of euros in emergency assistance from the lenders overseeing its bailout, almost none of the money is going to the Greek government to pay for vital public services. Instead, much of it is flowing directly back into the troika’s pockets. The European bailout that was supposed to buy time for Greece is mainly servicing the interest on the country’s debt; other funds have been set aside for propping up the nation’s shaky banks. Meanwhile, the Greek economy continues to decline.

In early May 2012, voters upended the country’s political system in a parliamentary election that saw the crushing defeat of the dominant parties, who were blamed for Greece’s collapse. Parties representing the left and the far-right made gains, as Greeks protested the austerity pact.