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Greece approves austerity budget

From Elinda Labropoulou, For CNN
"For sale" notices are on a Greek flag waved by a demonstrator outside the Greek parliament in Athens on Wednesday.
"For sale" notices are on a Greek flag waved by a demonstrator outside the Greek parliament in Athens on Wednesday.
STORY HIGHLIGHTS
  • Greece's parliament approves a 2011 budget
  • The plan cuts spending in several public sectors
  • The move is required by the massive bailout in May
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Athens, Greece (CNN) -- The Greek parliament early Thursday approved an austerity budget that makes cuts required under conditions of a massive bailout from the International Monetary Fund and the European Union in May.

The 2011 budget foresees the deficit declining from 9.4% of GDP to 7.4%. Many of the cuts are focused on the public sector, including health, education and public enterprises such as the railways and other forms of public transportation.

The vote was 156 to 142.

The budget forecasts tax revenues will increase by 7% at a time the overall economy is expected to shrink by 3%. The plan also focuses on reducing corruption and tax evasion, both of which have been blamed for Greece's dire financial state.

Greece's economy has suffered a severe blow after it was revealed early this year that the country's budget deficit was more than twice as big as forecast.

The new fiscal measures are required under the conditions of the massive bailout. The three-year, 110-billion-euro package saved Greece from financial default.

Last week, huge crowds of protesters, upset about stringent Greek economic reforms, marched past the Greek parliament as police in white helmets tried to keep them from getting any closer.

The new round of austerity measures focuses on structural reforms, particularly in the public sector, which employs more than 20% of the Greek labor force.

An initial round of cutbacks was introduced in the spring.

The changes implemented by Prime Minister George Papandreou have cut government spending, including wage and pension reforms; and brought changes to the tax code, giving the Greek government an opportunity to rebuild.

 
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