Greece makes further cuts

George Papandreou

The Greek Prime Minister George Papandreou has announced an additional 4.8 billion euros of deficit cuts as he tries to convince European allies and investors that he can reduce the region's biggest budget gap.

The measures to be introduced will include higher tobacco, alcohol and sales taxes that seek to raise 2.4 billion euros in revenue, said Deputy Citizen Protection Minister Spyros Vougias after a Cabinet meeting in Athens to pass the plan.

The government will also cut by 30 percent, three additional salary payments civil servants receive at holiday times, a move union leaders have already warned will spark further protests, Business Week reports.

Greece is trying to reduce its deficit after EU leaders called for Papandreou to adopt additional cuts before allies would come to its aid. The announcement comes as Papandreou prepares to meet Germany's Angela Merkel on 5 March and French President Nicolas Sarkozy on 7 March to discuss its finances. Greek bonds advanced for a fourth day today on the prospect that the deficit measures might lead to EU help.

Today's measures are the equivalent of two percentage points of GDP, about half Greece's pledged deficit reduction for this year. The package includes raising the main value added tax to 21 percent from 19 percent and increasing alcohol and tobacco taxes for a second time this year. Civil servants will also see the reduction in benefit payments increased to 12 percent from the 10 percent in the original plan.

Greek bonds gained for a fourth day today, with the yield on the benchmark 10-year bond falling 12 basis point to 6.03 percent.

"If our country doesn't manage to borrow with similar terms as is normal for a European Union country, then the consequences will be something more than catastrophic," Papandreou said in a speech.

Jodie Humphries

Jodie Humphries graduated from Bath Spa University with a BA Hons in Creative Writing in 2008. She has worked for GDS Publishing for the digital group since July 2009. She has previous experience with writing for the web, running her own website since April 2007.

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