Greece adopts austerity plan as pressure mounts

Greek lawmakers attend a parliament session in Athens, February 28, 2012. [Photo/Agencies]

ATHENS/BRUSSELS - The Greek parliament passed late Tuesday a fresh package of spending cuts to secure the release of a second bailout package to avoid a bankruptcy in March, deputy speaker Grigoris Niotis announced.

The 3.2-billion-euro ($4.3 billion) worth measures are part of so-called "prior actions" requested by international creditors before the release of the vital 130-billion-euro aid package, the second since May 2010 to address the severe debt crisis.

European Union (EU) leaders are due to examine later this week in Brussels the progress Greece has made in fulfilling the preconditions of the bailout deal and the implementation of an accompanying plan, known as the Private Sector Involvement (PSI).

Restoring confidence among its EU partners seems especially crucial for Greece to secure aid to cover its 14.5-billion-euro bond repayment due on March 20. A failure to repay the debt will lead to the country's financial collapse.

Martin Schulz, president of the European Parliament (EP), urged EU countries to be fully aware of the potential repercussions a Greek economic collapse would have on the euro and the global economy.

Greece and Europe are "in the same boat" amid the debt crisis and solidarity with Athens should be shown with further action, he said in Athens on Tuesday.

"Greece has a bright future if we work together. Greek people need solidarity in action, no more words," Schulz stressed during a series of meetings with the Greek political leadership.

Only hours before the Greeks adopted the new austerity plans, Germany's top court ruled that a small fast-track committee set up by the German Parliament to approve emergency steps for fighting the eurozone crisis was illegal.

The German parliament, or the Bundestag, created the nine-member panel in October to allow Germany to take quicker actions in dealing with the eurozone crisis.

But the Federal Constitutional Court said the committee, which operated behind closed doors, violated the rights of other Bundestag members.

The move could potentially hinder further German efforts to aid those struggling eurozone nations.

Only one day prior to the court ruling that cast a shadow on future bailout measures from Europe's largest economy, ratings agency Standard & Poor's (S&P) late Monday cut Greece's "CC" long-term and "C" short-term sovereign credit ratings to "selective default", in response to Greece's public offer for a debt restructuring plan last Friday.

The measure foresees the write-down of 107 billion euros ($144.23 billion) owned by the private sector.

It included collective action clauses (CACs), which required all private debt holders to participate in the process that started last Friday and is due to be completed by mid-March.

S&P viewed the move as an "unilateral change of the original terms and conditions of an obligation", saying it led to a "de facto restructuring and thus a default."

Torn by harsh demands from the EU and angry protestors at home, the Greek government is struggling to make ends meet to keep the country afloat.