EU endorses Greece bailout after painful austerity

European finance ministers endorsed a 110-billion-euro ($147 billion) bailout to save Greece from financial ruin on Sunday after Athens committed itself to years of painful austerity.

EU endorses Greece bailout after painful austerity

European finance ministers endorsed a 110-billion-euro ($147 billion) bailout to save Greece from financial ruin on Sunday after Athens committed itself to years of painful austerity.

Eurozone finance ministers gave their green light to the long-delayed deal after Greece announced it would slash public sector wages, raise the retirement age and increase taxes despite stiff resistance from unions.

The confirmation of a deal came in an announcement in Brussels by Luxembourg Prime Minister Jean-Claude Juncker, head of the eurozone's group of finance ministers.

Greek Prime Minister George Papandreou warned his nation that it would have to make "big sacrifices."

More cuts?

Finance Minister George Papaconstantinou said, Greece will cut the deficit by 30 billion euros over three years under the package of austerity measures with the EU and IMF.

Under the deal with the European Union and International Monetary Fund (IMF), Greece plans to cut the deficit to 8.1 percent of gross domestic product (GDP) in 2010, 7.6 percent in 2011 and 6.5 percent in 2012.

The deficit would not fall below the EU's 3 percent of GDP limit until 2014. Debt was expected to rise to nearly 150 percent in 2013, before falling from 2014.

He said the measures included a rise in value-added tax (VAT) to 23 percent from 21 percent, a 10 percent hike in fuel, alcohol and tobacco taxes and a further reduction in public sector salaries and pensions.

Greece would be shielded from exposure to debt markets for three years under the plan, he added.

The Greek government is now forecasting GDP to contract by 4.0 percent in 2010 and 2.6 percent in 2011, before returning to growth of 1.1 percent in 2012.

However, the European Central Bank warned Greece that it could be asked to make more cuts.

The ECB's governing council "considers essential that the Greek public authorities stand ready to take any further measures that may become appropriate to achieve the objectives of the programme," said an ECB statement.

"Most unfair measures in modern history"

Greek unions immediately voiced their dismay and vowed to step up their campaign against the cuts, one day after 15,000 people swarmed through the streets of Athens in May Day protests.

Yannis Panagopoulos, president of the million-member strong GSEE union, denounced the government's plan as the "most unfair and hardest measures in the modern history of Greece."

"They are going to worsen the recession and plunge the economy into a deep coma," he added. "It's time to step up the social battle, our May 5 general strike will be the beginning of a long battle."


Agencies


Related news reports:

Greece unveils "major sacrifices" for EU-IMF deal - UPDATED

Last Mod: 03 Mayıs 2010, 15:34
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