The Greek government has approved a
new package of tax increases and spending cuts to save $6.5 billion and ease
its budget crisis.
The measures include rises in sales
taxes, a cut in holiday bonuses paid to civil servants, and a pensions freeze.
The EU had called for austerity
measures amid fears that Greece’s problems could undermine the eurozone.
The new package was condemned by
Greek trade unions but welcomed by the European Commission.
Commission President Jose Manuel
Barroso said the plan confirmed that the Greek government was committed to
“taking all necessary measures” to cut its deficit.
The new measures include:
Cuts in public sector pay
An increase in sales tax from 19
per cent to 21 per cent
Rises in taxes on fuel, cigarettes
Rises in taxes on luxury goods
Greek Prime Minister George
Papandreou has likened the budget crisis to a “wartime situation”.
He told reporters: “These
decisions are necessary for the survival of the country and the economy, so
that Greece can exit the vortex of speculators and defamation, so that we can
breathe and keep on fighting.”
The socialist government has
pledged to reduce Greece’s budget deficit from 12.7 per cent more than four
times the limit under eurozone rules – to 8.7 per cent during 2010.
It is also seeking to reduce its
$419 billion debt.
The German government welcomed the
new austerity plan, saying it was likely to inspire confidence in Athens.
The US credit rating agency Moody’s
said they were “a clear manifestation” of Greece’s resolve to regain
control of its public finances.
The package may have pleased Europe
and financial markets, but they have infuriated the Greek trades unions and
The head of the civil service union
described the wage cuts and tax increases as unjust.
The leader of the influential
Communist Party described this latest round of financial pain as “shameful”
and called for the working class to rise up against the EU and international
Panayiotis Vavouyios, head of the
retired civil servants’ association, said: “It is a very difficult day for
us. These cuts will take us to the brink.
Mr Papandreou is due
to meet German Chancellor Angela Merkel in Berlin later on Friday.