Greek lawmakers expected to pass austerity budget (AP)

ATHENS, Greece ? Greece's lawmakers were set Tuesday to pass next year's budget, one that extends tough austerity measures that have already left Greeks struggling as the country tries to slash its debts and pull itself out of a severe recession.

With three parties, including the country's majority socialists and their rival conservatives, involved in Greece's new coalition government, the budget is expected to pass with an overwhelming majority in a midnight vote.

It foresees a fourth year of recession in 2012, although it also projects a primary surplus ? a surplus excluding interest payments on debt ? of 1.1 percent of gross domestic product.

Greece's debt troubles have roiled the euro, with Europe's single currency facing its largest crisis since it went into circulation in 2002. The Standard & Poor's ratings agency placed 15 of the 17 eurozone countries on notice for possible downgrades. The only two it left out were Cyprus, whose bonds have near-junk status, and Greece, whose low ratings suggest it is likely to default on its debts soon anyway.

On Monday, German Chancellor Angela Merkel and French President Nicolas Sarkozy urged changes to the EU treaty that would centralize decision-making on spending and borrowing for the eurozone. Tighter political and economic coordination among euro countries is seen as a precursor to further financial aid from the European Central Bank, the International Monetary Fund, or some combination.

Greece has been relying for financial survival on billions of euros (dollars) in rescue loans from other eurozone countries and the International Monetary Fund since May 2010. In return for the first bailout, the country imposed a series of harsh austerity measures, including salary and pension cuts and repeated rounds of tax hikes that have left the country mired in a deep recession.

Despite the measures, the government found itself persistently missing the fiscal targets set out in its first bailout. A second rescue package worth euro130 billion ($175 billion) was put together in October, and includes plans for private creditors to write off 50 percent of their Greek bonds, potentially cutting the country's debt by euro100 billion. Negotiations on the details of the deal are expected to extend into the new year.

Source: http://us.rd.yahoo.com/dailynews/rss/eurobiz/*http%3A//news.yahoo.com/s/ap/20111206/ap_on_bi_ge/eu_greece_financial_crisis

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