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Greek PM outlines cuts, issues debt warning

GREECE: Greek Prime Minister George Papandreou outlined sweeping public spending cuts on Monday to bring Greece’s deficit into line and warned that a spiralling debt crisis could sink the economy.

“Greece faces the risk of sinking under its debt,” Papandreou said in a speech that had been eagerly awaited by the financial markets.

He said Greece had “lost every trace of credibility” because of the crisis.

“It is time to address and resolve once and for all deep rooted problems that are holding the nation back,” he added.

His proposals included curbs on public sector hiring and pay, a 10-percent cut in social security and “a significant reduction in military expenditures.”

He also called for a 90-percent tax on bonuses at banks and an overhaul of the fiscal system in order to drum up more revenue for the state.

The measures are to come into force from early 2010 and will bring the deficit down below 3.0 percent of output as required by the eurozone, he said.

Greece’s deficit is set to rise to 12.7 percent of gross domestic product this year well above the limit for countries using the euro currency.

The crisis described by the Greek finance ministry as the worst in the country’s modern history has raised the yields on Greek bonds, which means that the Greek state has to pay higher interest on its loans.

The Government’s plans threaten to spark fierce union resistance, with a leading trade union firing a warning shot hours before Papandreou’s speech on the nation’s crippling 300-billion-euro (442-billion-dollar) debt.

The main union representing civil servants, Adedy, told the socialist government, which ousted the conservatives in October’s general election.

Athens, Thursday, AFP

 

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