Greek parliamentarians have gathered to debate emergency legislation to approve a bond swap that would wipe $142bn off the country's privately held debt, as new projections indicate that the the economy will suffer the worst contraction in Europe this year.
Parliament will vote on Thursday evening on the proposed deal, which has already been approved at committee level. The governing coalition controls a strong enough majority to easily pass the law.
The losses to be imposed on banks, pension funds and other private holders of Greek government bonds was agreed upon this week by finance ministers from the 17-member eurozone.
The meeting in Brussels also approved a new $172bn bailout to prevent Greece from going bankrupt and keep the country within the euro area.
Evangelos Venizelos, the Greek finance minister, has said he hopes the new agreement on rescue loans will be signed and validated by the end of March.
Speaking in Parliament on Wednesday, Venizelos insisted that ratifying the bond swap was the only way forward, and the alternative would be catastrophic, setting Greece back decades.
"The true dilemma is: either sacrifices with prospects, or complete destruction with no prospects," he said.
"Either cuts which are harsh ... or the inability to pay salaries and pensions. Either reduction of fortunes, or a complete loss of fortunes. Either high unemployment or generalised unemployment."
In its latest projections on Thursday, the European Commission forecast a 0.3 per cent contraction in the eurozone economy this year, with Greece leading the way down with a massive 4.4 per cent decline. That would be the fifth straight year of recession in Greece.
"Now Greece is obtaining a window of opportunity. We must make the most of it," Venizelos told parliament.
"We have not finished. We are starting again with better terms. We mustn't repeat mistakes, we mustn't have delays ... We must complete the implementation of the programme."
As Venizelos spoke, state hospital doctors went on a 24-hour strike and several hundred doctors and health workers held a peaceful protest march to parliament in central Athens.
Debt relief deal
The debt relief deal will force private bond holders to exchange their devalued Greek government bonds with new ones with a 53.5 per cent lower face value, longer maturities and lower interest rates, an average 3.6 per cent, compared to the previous 4.85 per cent.
"This law has to be voted one day before it comes into effect and the [bond swap] is officially announced,'' Venizelos said in his speech to parliament.
Once the public offer is made, the bond holders will be given 10 days to respond whether they will take part in the exchange.
The bill being debated includes collective action clauses that, if activated, will allow a majority of bondholders favoring the swap to impose their decision on holdouts.
"If we do not implement that legislation, every speculator will be able to keep out of the process in the expectation of being paid in full," Venizelos said.
Venizelos wants the deal to be completed by March 12, two days before a batch of bonds worth more than $14bn starts to mature.
Parliament is also due to vote next week on further austerity measures in 2012 worth $4.2bn.
These will include reductions to already depleted pensions, and deep cuts in health, education and defence spending.
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