Page last updated at 00:20 GMT, Thursday, 24 December 2009

Greece votes for big budget cuts to reduce debt

Closed down shops in Athens
Greece is trying to reassure markets about its economy

The Greek parliament has voted to adopt big budget cuts designed to lower the country's high levels of debt.

Greece aims to shrink public debt to 9.1% of overall economic output next year, down from 12.7% this year.

To do this, it has outlined measures to cut public spending and boost revenue by cutting back on red tape.

Concerns about Greece's high level of debt have led the three main international credit ratings agencies to downgrade Greek government bonds.

Greece's public debt currently stands at 300bn euro ($428bn; £268bn).

The single-chamber parliament adopted the budget by a large majority, with the 160 Socialist Pasok deputies voting for, and 139 opposition members against.

One opposition member was absent.

Speaking after the vote, Prime Minister George Papandreou said the budget was "a contract to reconquer our credibility".

"We shall prove our capacity and determination to change this country, to ourselves and to any foreigner who puts in doubt our will," he continued.

Spending cuts

Last week, Mr Papandreou warned that the country was at risk of "sinking under its debts", unless it introduced spending cuts.

He outlined a number of measures to reduce debt levels, including a 10% cut in social security spending.

He also announced a 90% tax on the bonuses of senior bank workers.

Other proposals included a cut in defence spending, pay and hiring freezes for public sector workers, and the closure of a third of Greece's overseas tourism offices.

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