The Greek cabinet agreed austerity measures worth 4.8 billion euros under pressure from European Union and European Central bank chiefs to reduce the country’s budget deficit by four percentage points to 8.7 per cent of gross domestic product.
Measures announced so far include:
- Public-sector workers, who have staged strikes and protests against the plans, will see their annual bonuses cut by 30 per cent;
- Pensions will be frozen;
- The top rate of Value Added Tax will rise two points to 21 per cent and lower rates will also go up;
- Excise taxes on fuel, alcohol and cigarettes will be increased for the second time in two months.
“We are awaiting European solidarity, the other side of this agreement,” Papandreou told President Carolos Papoulias. The Prime Minister says that he may ask for help from the International Monetary Fund if the EU does not provide aid.
European Commission President Jose Manuel Barroso declared that Europe will show its solidarity but gave no details as to what form it may take.
Germany, which opposed earlier bail-out proposals, declared that the measures are likely to “be greeted with a clear show of confidence”.
Greek bonds rallied on news that the austerity measures were to be announced.