Greece cutting the fat to stunt growing debt

Greek Finance Minister Evangelos Venizelos on Sunday announced new budget cuts totalling around €2-billion as demanded by the European Union and the International Monetary Fund (IMF) in exchange for a rescue package for the debt-ridden country.

For the country to be able to meet its obligations, “there is a shortfall of about €2-billion which must be covered,” he said on Greek television. “And the only effective measure is a special tax on real estate.”

The minister said this “new national effort” was crucial given the unfavourable perception of Greece abroad, with renewed rumours of a debt default or Greece’s possible exit from the euro zone.

Euro zone leaders announced a €159-billion rescue package for Greece in July but many Greeks fear the stringent conditions set for the money to trickle down will only make unemployment worse.

“Our immediate priority is the full respect of the budget targets for 2011,” Venizelos said, with a deficit of €17.1-billion “including debt servicing” and “14.9-billion for 2012.”

He stressed that Athens would continue to work as scheduled with the EU, the European Central Bank and the IMF but he pointed to “a changing landscape due to the position of some very important countries and with a decisive role in the euro zone”.

German Chancellor Angela Merkel has called on the Greek government of Prime Minister George Papandreou not to waver in his reform drive.

“Greece knows that credit is only available if it meets its obligations,” she said in an interview with the Sunday edition of Berlin’s Tagesspiegel newspaper.

German Finance Minister Wolfgang Schaeuble doubted Greece could avoid bankruptcy and prepared for a scenario where the debt-stricken nation became insolvent, the Spiegel magazine reported on its website on Saturday.

Spiegel said that German finance ministry officials are contemplating two scenarios should Greece become bankrupt: one where the country stays in the euro zone, and another where it reintroduces its former currency, the drachma.

Merkel, in her interview, appealed for greater European integration to resolve the grave debt crises plaguing Greece and other nation’s on the continent.—AFP