Page last updated at 10:08 GMT, Wednesday, 3 February 2010

Greece unveils austerity programme to cut deficit


Greece's public debt stands at about 300bn euros

Greek Prime Minister George Papandreou has announced tough austerity measures aimed at cutting his country's soaring public debt.

Mr Papandreou said a public sector pay freeze and fuel duty increases were essential because the economic crisis was propelling Greece towards a cliff.

He said the EU was pressuring him to curb the budget deficit, which is four times higher than the 3% permitted.

The European Commission will meet later on Wednesday to consider his measures.

Earlier, one of the principal architects of the euro warned against any financial rescue of Greece, saying it could destabilise the currency.

The German economist Otmar Issing told the BBC that after years of violating rules and cheating on its statistics, Greece had to reform its own economy without a bailout from Brussels.

Gavin Hewitt
Austerity will be a hard sell - many on the left will fight cuts and wage freezes
Gavin Hewitt
BBC Europe editor

"These reforms which are needed will be blood and tears... but without that, Greece will never overcome the difficulties," he said.

'Unprecedented crisis'

In a televised address on Tuesday, Mr Papandreou urged the public and his political rivals to support his austerity programme.

"This is an effort to stop the country's course towards the cliff," he said.

"Our country is at the centre of a speculative attack. It is being treated as the weak link of the Eurozone.

"We must act in an imminent and efficient manner and it is for that reason that I called on the political parties to support this national effort," he added.

A deficit of such a magnitude must be decisively corrected
Jose Manuel Barroso,
European Commission president

The prime minister said tough measures were needed in the face of such an "unprecedented crisis", including a 10% cut in wages and spending in the public sector, a higher retirement age and an increase in fuel prices.

He also pledged to go after tax evaders and said those who could afford to pay more would be forced to do so.

"The time has come to take brave decisions here too in Greece as others have done in European Union countries," Mr Papandreou said.


BBC Europe editor Gavin Hewitt, who is in Athens, says the view of the European Union is that the Greek plan is risky but achievable.

The bloc is likely to offer its support, but on the condition that Greece accepts outside scrutiny of its accounts, he says.

"A deficit of such a magnitude must be decisively corrected. Moreover the government debt in Greece is excessively high," European Commission President Jose Manuel Barroso told reporters.

European debt and deficit figures

EU rules state that no nation in the euro bloc should have an annual budget deficit which is higher than 3% of its gross domestic product. The Greek government aims to shrink it to 9.1% of overall economic output this year, down from 12.7% last year.

Meanwhile Greece's national debt stands at about 300bn euros ($419bn, £259bn).

Our correspondent says the first challenge for the austerity package may come on the streets, with public sector workers planning a strike next week.

"The government's policies are clearly aimed exclusively at raising money and once again lay the burden on those who have been exploited for years - workers and pensioners," Ilias Iliopoulos, general secretary of the civil servants' union, told the Associated Press news agency. "These policies will lead nowhere."

Farmers are already blocking major roads across the country in a bid to get financial help from the government, which has so far refused.

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