News / Europe

Greece, Italy Struggle with Economic Woes

Greek PM Lucas Papademos attends a parliament session with a copy of Greece's 2012 budget placed on his desk in Athens, November 18, 2011
Greek PM Lucas Papademos attends a parliament session with a copy of Greece's 2012 budget placed on his desk in Athens, November 18, 2011

Greece is predicting that its budget deficit will decrease sharply next year, even as its economy continues to contract and unemployment increases.

The interim Greek government unveiled its 2012 austerity budget to Parliament Friday. It says the spending plan must be adopted soon for the country to secure an $11 billion installment from last year's international bailout to help it avoid a default.

Finance Minister Evangelos Venizelos said the country would not need to impose any new austerity measures beyond the unpopular tax increases, spending cuts and elimination of government jobs proposed in recent weeks. He said the government deficit would fall from 9 percent of the country's gross domestic product this year to 5.4 percent in 2012, mostly because European banks have agreed to forgive about half of the country's debt.

The austerity measures already in place have led to a deep recession in Greece, with a 5.5 percent contraction this year and another 2.8 percent slide projected for 2012. The government projects that its current unemployment rate of more than 15 percent will increase to more than 17 percent next year.

Italy's Prime Minister Mario Monti gestures during a vote of confidence at the Lower House of Parliament in Rome, November 18, 2011
Italy's Prime Minister Mario Monti gestures during a vote of confidence at the Lower House of Parliament in Rome, November 18, 2011

Meanwhile in Rome, the government of new Italian Prime Minister Mario Monti won a second confidence vote in Parliament, as he gained new support for his austerity plan to help trim the country's $2.6 trillion in debt.

The lower Chamber of Deputies gave overwhelming approval Friday for the collection of bankers, business executives and university professors that Mr. Monti named to his Cabinet as he shunned selection of any politicians. The upper chamber had given the premier a clear vote of confidence on Thursday.

Mr. Monti pleaded with Parliament to let his government serve until the end of the legislative term in 2013 and not call early elections. Former Prime Minister Silvio Berlusconi said Friday that is acceptable to him.

Some information for this report was provided by AP, AFP and Reuters.

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