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Greece unveils new austerity measures

Date: Wednesday 03 Mar 2010

Greece unveils new austerity measures

Greece has unveiled a new package of austerity measures in an attempt to convince investors and fellow EU members it is serious abut tackling its debt crisis.

The proposals, which would see an immediate pension freeze, wage cuts in the public sector and higher VAT, are designed to save €4.8bn annually and reduce Greece’s budget deficit to 8.7% of GDP.

It is the third package of measures put forward by Greece’s prime minister George Papandreou and comes weeks before a €20bn debt renewal for the country. Greece’s total debt is estimated at €300bn.

Markets were expecting a new series of cuts after meetings last week between the government and EU officials. Yesterday, Mr Papandreou compared his country's fiscal crisis to a 'war' and said warned harsh and possibly unfair measures were on the way.

Today, he revealed what those measures are - VAT will rise by 2 percentage points to 21%, public sector salary bonuses at Christmas and Easter will be slashed by 30%, while taxes on fuel, alcohol and cigarettes will be increased for the second time in two months.

The Euro rose slightly on the news, but doubts remain about how Greece can deliver on the proposed measures given fierce protests in the country and calls for national strikes from left-wing groups.

The Greek PM travels to Germany this week to meet chancellor Angela Merkel, who has demanded Greece had to take more action to cure its debt problems before it would be considered for a bail out by the European Union.

Today, Papandreou said Greece had done enough to satisfy its critics and if the EU was not supportive it could go to the IMF for asistance.

"I informed the President of the Republic about the difficult decisions that we have taken. Decisions which were not a choice, but a necessity in order for the survival of our country and our economy," he said.

He has already announced a freeze on public sector pay and hiring, cutting civil servants’ bonuses and increased the retirement age by two years.


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