The Greek government has passed another multi-billion euro package of cuts as it seeks to convince markets and fellow members of the euro that it's serious about tackling the deficit.

George Papandreou, the Greek prime minister, said on Wednesday that the measures, which include higher taxes on alcohol and cigarettes, were needed to avoid a fiscal 'catastrophe.'

Greece has been at the heart of a financial storm so far this year that has left European Monetary Union facing the severest crisis in its short history. Scepticism about whether German and French voters would stomach bailing Greece out of its debt crisis has driven Greece's cost of borrowing to its highest since it joined the eurozone.

Mr Papanderou is due to meet German Chancellor Angela Merkel and Nicolas Sarkozy, the French president, later this week and will need to show them that his government is serious about tackling a deficit that's due to reach 12pc of gross domestic product this year.

“Today’s announcement is as much about giving other EU governments more political capital in the event that they do eventually need to provide liquidity to Greece,” Gary Jenkins, head of credit research at Evolution Securities, told Bloomberg. “They can make the claim to their own taxpayers that Greece has taken further measures as suggested by the EU.”

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