Greece's parliament passed early on Thursday the socialist government's 2010 budget, which aims to cut the public deficit to single digits as a first step toward pulling the indebted nation out of its fiscal crisis.
The budget was approved on a strict party-line vote by 160 ruling party lawmakers in the 300-strong parliament. It targets a fiscal gap of 9.1 percent of gross domestic product in 2010, down from 12.7 percent this year.
All three major credit rating agencies have downgraded Greece since the 2010 draft budget was unveiled last month, on concerns over the country's fiscal deterioration and worsening debt dynamics.
"This budget is a contract to redress our economy and regain our credibility," prime minister George Papandreou told lawmakers before the vote. Despite an economic slump, the government expects ordinary budget revenues to increase by 9 percent next year. Spending before debt service payments is seen shrinking by 3.8 percent.
Many analysts believe the budget targets are attainable but provide no guarantee for fiscal restraint in subsequent years as they rely on one-off measures such as a windfall corporate tax and a crackdown on tax evasion.
Papandreou, who won October 4 elections on a promise to tax the rich and help the poor, has refused to take drastic measures, such as across-the-board public sector wage cuts, to shore up Greece's battered finances.
Greece's main opposition conservatives rejected the budget, saying more specific measures were needed to tackle the country's fiscal problems. Smaller parties of the left also voted against it, claiming it did not boost lower incomes.
Greek bonds, stocks and credit default swaps have been pressured in the past weeks over fears the country''s bonds may not make it as acceptable collateral in European Central Bank repurchase funding operations.
Rating agencies have warned they may cut Greece's rating further if the government fails to win public support for tougher, long-term fiscal measures.
Public sector trade union ADEDY has already threatened to hold a 24-hour strike by early February to protest against budget reforms, which it claims are imposed by the markets.
The government plans to lay out its updated growth and stability plan next month, its roadmap of specific targets to restore fiscal health and bring the deficit below the euro zone''s ceiling of 3 percent of GDP by 2013.
