Tags: EU | Greece | Financial | Crisis

Greek Premier Seeks EU Support for $6.5 Billion in Additional Cuts

Wednesday, 03 Mar 2010 07:24 AM

Prime Minister George Papandreou said Wednesday that Greece was now awaiting strong support from the European Union after ordering even more painful budget measures officials say will save the country 4.8 billion euros ($6.5 billion).

Papandreou said he was "awaiting European solidarity" as he briefed Greece's president ahead of the formal announcement of renewed measures to defuse a government debt crisis that has shaken the entire EU and undermined the euro currency.

Speaking to reporters after the meeting, Papandreou said the measures were "necessary for the survival of our country and our economy."

Papandreou will meet German Chancellor Angela Merkel in Berlin on Friday and French President Nicolas Sarkozy in Paris on Sunday, as the European Union remains tightlipped over a possible bailout plan to be made conditional on the cuts.

Government officials said the measures would include cuts in annual pay for civil servants through reducing their Easter, Christmas and vacation bonuses by 30 percent each, and a 2 percentage point increase in sales tax to bring it to 21 percent from the current 19 percent.

In a dramatic speech to his Socialist party deputies in Parliament on Tuesday night, Papandreou said his country was in a "state of war" and was fighting for its national survival.

The new austerity package comes after European Union officials bluntly told Athens to make deeper spending cuts. Ratings agencies have also warned of more damaging downgrades if Greece is unable to rein in its debt.

One government official, speaking on condition of anonymity ahead of the official announcement, said the measures would send a "clear message to the European Union and international markets" and that "we have exhausted our limits."

Initial market reaction was positive. Analysts estimate that the package — set to be backed by the European Commission later — will give Greece enough breathing space to launch an expected 5 billion euro bond issue over the next few days as the yield on Greek bonds has fallen to below the level they were at the time of the last auction.

Greece has around 20 billion euros worth of debt maturing in April and May, so the government will have to tap the markets for more cash, and for that, firmer pledges of support from other euro-zone countries are still likely to be required, said Ben May, European economist at Capital Economics.

"The Greek PM's meeting with Angela Merkel on Friday could be crucial," he added.

In his Tuesday speech, Papandreou said all Greeks would have to accept painful sacrifices, and he warned of "catastrophic" consequences unless the country can borrow on international markets at lower lending rates.

Greeks have their annual salaries split into 14 monthly installments, with the last two considered holiday bonuses. Unions have said abolishing the 14th salary would be tantamount to a "declaration of war."

"It is a very difficult day for us ... These cuts will take us to the brink," said Panayiotis Vavouyios, the head of the retired civil servants' association. "Brussels is demanding cuts and the government is doing nothing to stop them. To make poor pensioners pay for this crisis is a disgrace."

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Prime Minister George Papandreou said Wednesday that Greece was now awaiting strong support from the European Union after ordering even more painful budget measures officials say will save the country 4.8 billion euros ($6.5 billion).Papandreou said he was awaiting...
EU,Greece,Financial,Crisis
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2010-24-03
Wednesday, 03 Mar 2010 07:24 AM
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