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The Honolulu Advertiser
Posted on: Saturday, May 1, 2010

Greece plans new cuts, taxes

By Nicholas Paphitis
Associated Press

Hawaii news photo - The Honolulu Advertiser

Greek Finance Minister George Papaconstantinou said a deal is "very close" on an emergency economic rescue package.


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ATHENS, Greece Facing a choice of additional pain or bankruptcy, Greece yesterday heralded drastic new cuts and tax increases to win rescue loans from its European partners and the International Monetary Fund and avoid a disastrous default on government debt.

Prime Minister George Papandreou said cuts are inevitable if the country is to keep afloat.

"The measures we must take, which are economic measures, are necessary for the protection of our country. For our survival, for our future. So we can stand firmly on our feet," Papandreou said in parliament.

Greece, the EU and the IMF are expected to complete talks this weekend over what extra steps Athens must take as a condition of the rescue, which would provide euro45 billion in loans this year and up to a reported euro120 billion over three years.

Papandreou is widely expected to detail the cuts tomorrow, the day after a protest rally planned by the country's biggest labor unions to mark May Day. Officials briefed on the negotiations say the plan will include a further slash in civil service pay, as well as state and private sector pensions, and a new hike in indirect taxes, including a 2 percentage point increase in sales tax.

Luxembourg's Jean-Claude Juncker, head of the Eurozone finance ministers, called a meeting of the 16 eurozone finance ministers in Brussels tomorrow to review the rescue. Juncker said the session is designed to assess the latest package of emergency measures Papandreou is likely to announce.

Once an agreement is in place, Germany which, as the largest EU contributor, has insisted on strict conditions for releasing the aid is expected to quickly push the issue through parliament so Greece can get the money to pay debts coming due May 19.