ATHENS (MNI) – Greece’s parliament has approved a controversial
package of austerity and privatization measures in a suspenseful vote
that will bring a collective sigh of relief, at least temporarily, to
global financial markets and the Eurozone.

The package, which includes E28 billion in spending cuts and tax
hikes, as well as a highly controversial privatization program pegged at
E50 billion, came amid ongoing protests in the streets of Athens on
Wednesday and reports of more violence between the protesters and
police.

Officials from the ECB, the European Commission and several
national Eurozone governments had warned that failure to approve the
measures would have dire consequences, including a Greek default on its
debt. The country’s central bank Governor George Provopoulos had warned
the night before the vote that rejection of the package would be
tantamount to national “suicide.”

The European Commission, the International Monetary Fund and the
European Central Bank — the so-called “troika” — have all said that
passage of the measures is an absolute condition for Greece to receive a
E12 billion loan tranche from its current EMU-IMF bailout plan. Without
that money, Greece would not be able to pay off bonds maturing in July
and would be in default.

With the money, Greece would stay afloat financially until
September, when the next tranche is due. European officials, along with
private creditor banks, are in talks for a second bailout package, for
an estimated E100 to E120 billion, which they hope will be in place
before September. EMU finance ministers are expected to sketch out at
least the broad outlines of the plan at meetings on July 3 and 11.

Today’s vote should greatly facilitate that process by providing
the breathing room that Greece needs. Prime Minister George Papandreou,
addressing Parliament moments before the voting began, said that
approving the measures was the only way for Greece to “buy time.” He
suggested that his government might revisit some of the more
controversial details in subsequent negotiations with its Eurozone
partners and the IMF.

However, today’s vote was only the first in a two-step process. On
Thursday, Parliament must vote again on a so-called “enforcement law,”
which is needed to actually ensure that the measures — if approved —
are implemented. But with the approval today of the basic content of the
plan, the chances that implementation might be rejected tomorrow seem
highly remote.

The package consists of three major categories: spending cuts,
which include pay cuts and job reductions in the public sector; tax
hikes, which include increases on virtually all income categories; and
privatization, which is to be managed by an outside agency with strong
input from foreign experts.

In an interview with the Financial Times Tuesday, Provopoulos
complained that the package puts too much emphasis on tax increases and
not enough on spending cuts. They are both extremely unpopular, as is
the privatization plan, and have brought tens of thousands of protesters
— and rioters — into the streets of Athens every day for the past
month.

Meanwhile, there are new questions about the ability of Greece to
hit its E50 billion privatization target.

The FT, citing a new report, said Greece “will struggle” to sell
even a quarter of the E50 billion targeted, “unless it adds more prime
land and cultural heritage to its sales list” — a move that would raise
the temperature on the streets even further.

According to the report, by Milan-based Privatisation Barometer,
only slightly more than E13 billion of Greek assets are ready to sell.
E6.6 billion from stakes in 15 listed companies and E7 billion from the
sale of 70 unlisted companies, a figure that the report calls
“optimistic.”

[TOPICS: M$X$$$,MT$$$$,MGX$$$,M$$CR$]