Greek cabinet backs sweeping austerity plan: source

Lefteris Papadimas and Renee Maltezou
Reuters
March 3, 2010

Greece’s cabinet approved a sweeping new austerity program on Wednesday, the third in as many months, to rein in a bulging budget deficit and secure European financial support, a government source said.

“Measures which will yield 4.8 billion euros ($6.5 billion) have been decided,” the source, who took part in the cabinet meeting, said. “Half will be from spending cuts and another 50 percent from tax increases.”

The measures include an increase of value added tax by 2 percentage points to 21 percent, cutting public sector salary bonuses by 30 percent and freezing state-funded pensions this year, the source said.

Prime Minister George Papandreou told the cabinet that if the European Union did not provide financial support now, Greece had the option of turning to the International Monetary Fund, a minister who attended the meeting said.

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