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Greece lowers recovery expectations
Greece lowers recovery expectations, insists new bailout will 'bind' it to the euro
By The Associated Press

ATHENS, Greece (AP) ' Greece on Wednesday insisted a new euro130 billion ($172 billion) bailout deal will "bind" it to the euro, but again lowered expectations of recovery as it faced skeptical world markets, continued protests and another downgrade of its debt deeper into junk status.

As the government scrambled to push new austerity measures, Finance Minister Evangelos Venizelos said the new rescue package approved by eurozone countries would shield Greece from default.

"The agreement is of historic importance, because it binds Greece to the euro," Venizelos told private Mega television.

"It was not only the approval of the euro130 billion in additional support for Greece. But this also comes with a European commitment ... of support for as long as in necessary for Greece to return to the markets."

He added: "This is a decisive and irreversible action by our partners: Greece is a member of the euro and will remain a member of the euro and there is no issue of bankruptcy, there is no issue of the country's financial collapse."

Earlier, around 6,000 protesters chanting "EU out, IMF out!" marched through central Athens in a peaceful rally against the new austerity measures.

Eurozone countries on Tuesday approved the new bailout deal, and a euro107 billion ($141 billion) debt writedown by banks and other private holders of Greek bonds.

In response, Fitch downgraded Greece's credit rating further into junk status, from 'CCC' to 'C' ' one notch above default ' while world markets appeared nervous at the prospects of forcing through new austerity measures in a country stuck in recession for a fifth year and with unemployment topping 20 percent.

Shares on the Athens Stock Exchange fell 5.67 percent to 751.96, as banks sustained heavy losses.

New austerity measures include slashing pensions and benefits, and cutting the minimum wage from euro751 to euro580 per month, defying pleas from unions and employers who argue warn the recession will deepen dramatically.

Dimitris Asimakopoulos, leader of a small business association, GSEVEE, presented a new study predicting that 100,000 more workers in the retail sector are likely to lose their jobs in the first six months of the year.

"The study reveals, with facts and figures, that we are unfortunately stuck in the mire of recession," Asimakopoulos said. "We will not emerge from this with wishful thinking about competitiveness and euro300 salaries."

In Parliament, lawmakers are preparing to debate emergency legislation that revises the 2012 budget and outlines additional budget cuts worth euro3.2 billion ($4.2 billion).

Under the revision, the budget deficit target was increased to 6.7 percent of gross domestic product, from an initial forecast of 5.4 percent. Even worse, plans for a modest primary surplus in 2012 ' which excludes debt servicing costs ' have been scrapped and Greece will instead post a primary deficit of nearly euro500 million ($661 million), or 0.2 percent of GDP.

Venizelos said legislation on the bond-swap deal had to be passed by late Thursday "because otherwise we will not meet our deadlines."

The coalition government has 193 deputies in the 300-seat assembly.

Private investors will swap their Greek government bonds for new ones with less than half the face value, longer repayment periods and lower interest rates ' an average 3.6 percent compared to the previous 4.85 percent. Greece wants the swap to take place by March 12.

But even with the writedown, Greece's national debt will be reduced at best from euro368 billion ($487 billion), or nearly 170 percent of GDP last year to 120 percent in 2020 ' around the level it was in 2009.

The latest budget cuts, detailed Wednesday include: euro400 million ($530 million) from pensions; euro170 million ($225 million) from health and education; euro500 million ($661 million) from other health care subsidies; euro570 million ($754 million) on spending for medicine; euro400 million ($529 million) from defense.


Elena Becatoros contributed to this report.

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