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Thursday 04th of February 2010
February 3, 2010    

Greece unveils measures to cut soaring debt

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by Kay Murchie
Greece unveils measures to cut soaring debt

In an attempt to reduce its high levels of debt, Greek Prime Minister George Papandreou, has unveiled tough measures which include a public sector pay freeze and a hike in fuel taxes.

Further measures to reduce debt levels include a 10% cut in social security spending, as well as a massive 90% tax on the bonuses of senior bank executives.

The European Commission is to meet later today to discuss the PM’s measures.

The proposals come as the country is under pressure to reduce its debt - which currently has the highest debt of the 16-member euro zone.

Greece’s economy, which is considered to be the euro zone’s weakest, currently has debt of €300 billion (£259 billion) and there has been much speculation that the European Union will have to inject funds into its economy.

However, speaking at the World Economic Forum in Davos last week, Mr Papandreou denied speculation that it will have to be bailed out by the EU.

However, there are concerns that if Greece is not rescued by wealthier countries, investors may start to lose confidence in other European member states.

Meanwhile, Greece plans to reduce the public deficit from 12.7% of output in 2009 to 9.1% this year.

Greece’s runaway budget deficit is currently more than four times the EU limit of 3%.

In a further blow to the economy, late last year international ratings agency, Standard & Poor’s, cut Greece’s credit rating by one notch, to BBB+ from A-minus. Prior to that, credit rating agency, Fitch, also cut Greece’s sovereign debt rating to a decade-low to BBB+ from A- with a negative outlook.

In a live televised address yesterday evening, Mr Papandreou urged the public and his political rivals to support his austerity programme.

“Our country is at the centre of a speculative attack. It is being treated as the weak link of the euro zone,” he said.

“We must act in an imminent and efficient manner and it is for that reason that I called on the political parties to support this national effort,” he said.

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