Greek deal sees 30 bn euros in new deficit cuts

Greek deal sees 30 bn euros in new deficit cuts

Athens: Greece has agreed a package of austerity measures under which it aims to cut its budget deficit by €30 billion over three years on top of measures already agreed, Finance Minister George Papaconstantinou said on Sunday.

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

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

“We are all being called to make a choice," Papaconstantinou told a news conference in Athens.

“The choice is between collapse or salvation. The choice is between fleshing out a very ambitious and difficult 3-year programme of fiscal consolidation, a programme of structural reforms or the country reaching an absolute dead-end."

He said the measures included a rise in value-added tax (VAT) to 23% from 21%, a 10% 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% in 2010 and 2.6% in 2011, before returning to growth of 1.1% in 2012.