In return of an international rescue package to get Greece out of its debt crisis, the country has revealed austerity measures that will have to be taken.
On Sunday, prime minister George Papandreou said in a cabinet meeting that Greeks would be called upon to make “great sacrifices” in return for aid. (photo from aljazeera.net)
George Papaconstantinou, the finance minister, said Greece plans budget cuts of $40bn (30 billion euros) over three years with the aim of slashing the public deficit to less than three per cent of output by 2014.
He added that the austerity measures included a rise in value added tax (VAT) to 23 per cent from 21 per cent, a 10 per cent hike in fuel and alcohol taxes and a further reduction in public sector salaries and pensions.
Greece has reached an agreement with the International Monetary Fund as well as with the European Union on a rescue package.
“I have done and will do everything not to let the country go bankrupt,” he said.
“We have convinced our partners that Greece’s problem is not only ours. It concerns the functioning of the markets and the stability of the euro.”
The euro zone finance ministers were due to meet later in the day in Brussels, the Belgian capital, in order to approve the EU’s contribution to the international loan package.
European countries will provide two thirds of the bailout package, worth about $159bn over three years, and the rest will come from the IMF.
Al Jazeera’s Barnaby Phillips, reporting from Athens, said the coming spending cuts are “bad news” for ordinary Greeks.
“The holiday payments that Greek civil servants get in Easter, summer and Christmas … are going to be drastically reduced. Effectively it could mean that many people in the civil service get about a 10 per cent pay cut,” he said.
The Greeks have already been outraged by the spending cuts. Thousands of people took to the streets in order to protest.
According to Al Jazeera’s correspondent, in order to justify the cuts, the government was describing the rescue deal as necessary and not as bad as it could have been.
“George Papaconstantinou implied that the IMF had also pushed for compulsory pay cuts across the bigger private sector as well, and that the Greek government had successfully resisted this.”
Negotiations over the deal between the Greek government, the EU and the IMF were wrapped up on Saturday while some 15,000 people were demonstrating against the austerity drive in Athens.
Police fired tear gas at youths to contain clashes on the margins of the marches which Greek union leaders.
A nationwide general strike is expected on Wednesday.
Greece and its international backers hope the rescue package can stem a crisis that has already shaken markets worldwide. The other aim is to prevent the contagion to other euro zone members like Portugal and Spain.