Greek lawmakers headed Tuesday into a vote on a fresh batch of budget cuts after the country suffered a credit downgrade that could hamper efforts to cancel nearly a third of its huge debt.
Parliament was to decide after midnight (2200 GMT) on spending cuts worth 3.2 billion euros ($4.3 billion), which the two-party coalition government has the votes to approve.
The vote comes after ratings agency Standard & Poor's (S&P) declared Greece in "selective default" owing to a proposed debt swap with private banks, a move that forced the European Central Bank to suspend Greek bonds as acceptable collateral for ECB loans.
The latest Greek belt-tightening measures, coming on the heels of two years of austerity, have sparked street protests and sporadic violence in Athens and other cities.
But the new cutbacks are a condition for a eurozone bailout of 130 billion euros in direct aid combined with a 107-billion-euro debt writedown by private creditors, designed to save Greece from a disorderly default next month.
"This is an urgent bill ... because on (Thursday) the Eurogroup must confirm that the legislative actions undertaken by our country have been completed," Finance Minister Evangelos Venizelos told Greek deputies ahead of the vote.
The bill includes 12-percent cuts in civil servant pensions of more than 1,300 euros and reductions of between 10 and 20 percent in complementary pensions of more than 200 euros.
Civil service pensioners have already sustained a 10-percent cut in payments under measures adopted from 2010 in return for a previous EU-IMF bailout worth 110 billion euros.
The latest legislation also foresees a 10-percent cut in the salaries of senior municipal officials and a merger of state research organisations.
The socialist PASOK and conservative New Democracy parties that compose the government coalition of Prime Minister Lucas Papademos have 193 deputies in the 300-seat parliament, more than enough to pass the bills.
Another measure entailing cuts in medicine and hospital spending will be taken up on Wednesday.
Greek unions will stage a three-hour stoppage and an evening demonstration on Wednesday, part of a Europe-wide action day against austerity measures adopted to fight the eurozone debt crisis.
On Monday, S&P declared Greece in "selective default" after banks agreed to write off more than half of their Greek debt as part of the second EU bailout of the country.
The rating was lowered from S&P's already junk-level "CC" grade for Greece, which has been seeking to avoid an outright default on its massive debt by negotiating a "voluntary" debt exchange with creditors.
The bond swap was launched Friday and is scheduled to be completed on March 12, according to Greece's finance ministry.
At issue is whether the debt swap can be deemed 'voluntary' if just two-thirds of creditors sign up.
If it cannot, then creditors could invoke credit default swaps (CDS), which are insurance claims against losses on the bonds and which could possibly cause the entire Greek debt deal to unravel.
The International Swaps and Derivatives Association, an organisation representing over 815 market institutions, is expected to say Wednesday whether the Greek debt cut constitutes a credit event that would trigger the CDS'.
Source: AFP Global Edition