Greece faces a fresh set of austerity measures after a decision by Prime Minister George Papandreou’s cabinet approved, on March 3 2010, steps to cut the country’s huge budget deficit including an increase in value-added tax, cuts to public sector bonuses and a freeze on pensions, according to reports from Athens.
 
The measures Greece will undertake under Brussels’s pressure to reduce its budget deficit envisage a 30 per cent drop in the 13th and 14th salary in the country’s public sector, Greek Naftemporiki daily said, quoted by Bulgarian news agency Focus.
 
The 30 per cent cut in the Christmas, Easter and summer holiday bonuses will be backdated to January 1 2010.
 
In addition, VAT will climb by two per cent and all pensions will be frozen.
 
A government official says the measures will ensure 4.8 billion euro, with 50 per cent of this coming from expenditure cuts and the other half from tax increases.
 
Papandreou has likened the budget crisis to a "wartime situation", the BBC said.
 
Papandreou told reporters: "These decisions are necessary for the survival of the country and the economy, so that Greece can exit the vortex of speculators and defamation, so that we can breathe and keep on fighting."
 
A special envoy for Papandreou was to depart for Berlin on March 3 to hold "secret talks" with senior German officials on the occasion of the official meeting between the prime minister and Angela Merkel on March 5, Greek daily Ta Nea said.
 
It was expected that after the meeting between Papandreou and Merkel an initiative for easing crediting for Greece would be announced, Ta Nea said, quoted by Focus.
 
On March 2, days before Papandreou’s official talks with Merkel, US president Barack Obama’s financial adviser Larry Summers said that joint efforts were necessary to stabilise the situation so that the Greek budget could be put under better control and additional assistance could be granted.
 
In Athens, news agency ANA said that Papandreou had left open the prospect of Greece having recourse to the International Monetary Fund (IMF) if Greece was not financially backed by the EU.
 
The agency, quoting a senior government official, said that Papandreou had said this during the cabinet meeting. The same official said that EU backing was the main goal and orientation of the government.
 
However, in Berlin, a senior government spokesperson said that Germany would not offer any aid to Greece when Merkel met Papandreou, international news agencies said.
 
The spokesperson said that Berlin welcomed Greece’s moves to take on further austerity measures, but said that Greece must implement them alone, Deutsche Welle reported.

The euro rose against the dollar as Greece unveiled its new series of austerity measures, the BBC said on March 3. The euro rose 0.3 per cent to $1.3637 but was slightly lower against the pound at 90.60 pence.