ATHENS // Greece needs to take further action to tackle its debt crisis and must meet its budget goals, the EU economic affairs commissioner says. "I am asking the Greek government to announce new measures in the coming days," Olli Rehn said yesterday after talks with George Papaconstantinou, the Greek finance minister.
Mr Papaconstantinou said plans to deal with Greece's debt burden involved "dangers and risks, and some of these dangers are now visible", but the government would not waver in its commitment to reducing the deficit. "The government will do whatever it takes, including new measures so that the target for reducing the budget deficit by 4 per cent this year is observed unwaveringly," he said. The two men discussed reforms to the pension system, the budget and the statistics service, Mr Papaconstantinou said.
George Papandreou, the prime minister of Greece, earlier called on citizens to bear the pain required to put the country back on track, saying corruption and impunity were at the heart of its problems. "The crisis in our country is not limited to our fiscal problem. It is only the tip of the iceberg," Mr Papandreou said in a televised address to the cabinet. "Today we ask Greek men and women to enlist in our common cause to save our country, and the overwhelming majority of our citizens are willing to do it despite the price and despite the burden."
German politicians say that euro zone officials are devising a plan to grant Greece about ?25 billion (Dh124.89bn) in aid if necessary, possibly by using state-owned lenders such as the KfW Group to buy its bonds. Greece has a public deficit of about ?300bn, or 113 per cent of GDP, nearly double the 60 per cent limit for countries in the EU. Greece needs to raise funds to cover more than ?20bn of bonds and notes maturing next month and in May.
Greece has been under intense pressure from the EU and financial markets after it revealed late last year that its budget deficit for the year was forecast to reach 12.7 per cent of GDP - four times above EU limits. The government has since pledged to cut the deficit to 8.7 per cent of GDP this year and bring it below the EU's 3 per cent ceiling by 2012. It insists it will announce new austerity steps in the coming days. The additional measures will probably include an increase of between one and two percentage points in Greece's value-added tax rate, which stands at 19 per cent, as well as cuts in civil service salaries and pensions.
A further rise in fuel, cigarette and alcohol taxes are also likely in an effort to find another ?4bn in spending cuts. The promise of austerity measures last week sparked a nationwide strike that stopped flights, trains and ferries, and thousands rallied in Athens to protest. Monuments such as the Acropolis were shut down. Protesters marched to parliament against a public-wage freeze, tax increases and raising of the retirement age.
* with Reuters and Dow Jones