Greek government survives confidence vote

Greece’s government will approve its new austerity package today after it survived a confidence vote, clearing the first hurdle in a battle to secure emergency loans and avert the euro zone’s first sovereign debt default.
By The Newsroom
Published 22nd Jun 2011, 09:50 BST

Prime Minister George Papandreou’s reshuffled cabinet aims to get parliament approval for a package of spending cuts, tax hikes and state asset sales by June 28 and then push through laws needed to implement it within the next two weeks to avoid missing out on £10.6bn in aid and plunging into bankruptcy.

The vote follows a European ultimatum linking the release of the next instalment of a 110 billion euro EU/IMF aid package due in two weeks to a new five-year belt-tightening plan.

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Without the loans, Athens will run out of cash next month and policymakers fear a default would send shock waves through the global financial system.

The euro rose in hopes that the immediate threat of market chaos could be avoided, but the gains were short-lived as traders cited concerns about implementation of harsh austerity measures in a nation bruised by its worst recession in 37 years and doubts about Greece’s ability to reduce its debt burden without some form of restructuring.

“The reaction of the people is going to be critical. If we see cars burning and protests tomorrow, then all this short term success is going to get sucked out the window,” said William Larkin, a fixed-income portfolio manager at Cabot Money Management in Salem, Massachusetts.