Trust vote will rescue Greece from debt crisis, says German Chancellor

European leaders today heaved a sigh of relief after the Greek Government survived a vote of confidence and encouraged it to make all efforts to secure the Parliament’s approval for a new package of austerity measures to avert a bankruptcy.

The German Chancellor, Ms Angela Merkel, hailed the Greek Parliament’s endorsement of the Prime Minister Mr George Papandreou’s new Cabinet last night as an “important step” towards rescuing the country from its present debt crisis, which is threatening to spread to other cash-strapped nations in the euro zone.

However, the Government in Athens crossed only one hurdle in its efforts to stabilise the nation’s economy even a year after it received a €110 billion ($159 billion) bailout from the European Union and the International Monetary Fund (IMF) and it should take “all necessary steps” to ensure that its new austerity measures will win parliamentary support next week, she said.

The finance ministers of the euro zone nations last Sunday delayed a decision on releasing the latest tranche of that assistance, amounting to €12 billion ($17 billion), until the Greek Parliament approves the government’s austerity package, which aims to raise up to €28 billion through drastic spending cuts, tax increases and a privatisation programme.

The latest austerity measures after two unsuccessful packages earlier sparked off nation-wide strikes, protest demonstrations and riots in the capital. Greece urgently needs the fifth tranche to avert defaulting on its debt repayments due next month.

“The ball is now in the government’s court” and it should win the support of the Opposition before the voting on the austerity package scheduled for next week, Ms Merkel told a meeting of the European affairs committee of the Bundestag, the Lower House of Parliament, in Berlin.

On the eve of a crucial summit of the heads of state and government of the European Union in Brussels, Ms Merkel defended the decision of the euro zone finance ministers in Luxembourg to hold back the emergency assistance until the Greek Government’s new austerity measures are put in place.

She also reaffirmed her government’s intention to participate in a second multi-billion euro financial bailout of Greece if the government in Athens makes progress in implementing its austerity measures and in carrying out structural reforms to scale down its huge budget deficit and national debt, as well as to increase the competitiveness of the nation’s industries.

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