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Europe

Greece pledges bigger cuts to make EU targets

After admitting it will miss this year's targets, Greece has pledged to hike sales tax, freeze pensions and cut government waste in order to shrink its deficit in 2011.

Finance Minister George Papaconstantinou

Papaconstantinou has admitted there were problems

Greece has pledged to introduce tough new cuts in order to meet the terms of a European Union and International Monetary Fund bailout granted in April this year.

New measures such as lower defense spending, pensions freezes and further cuts to government waste are meant to shrink the deficit by 5.1 billion euros ($6.9 billion) next year. This would reduce the deficit to 16.8 billion euros (7.4 percent of GDP) and bring it in line with the terms of the bailout deal.

Sales tax will increase by 2 percent to 13 percent - after already being raised twice this year. Waste in the health sector will be specifically targeted.

Athens said it would miss the targets for 2010, blaming a deeper than expected recession and fiscal slippages. However, it plans to catch up in 2011.

People protesting

Austerity measures have already led to several strikes

"We have not yet won the battle but we are now in a better position to deal with the real problems ... a wasteful state, problematic state companies and tax evasion," Greek Finance Minister George Papaconstantinou told a news conference after submitting the budget to parliament.

Feared union backlash

In response to the budget, the public sector labor union said it would join private sector workers in a 24-hour general strike planned for December 15.

"Unprecedented austerity will hurt all civil servants and private sector workers, with no exception," the head of the private sector union GSEE, Yannis Panagopoulos, said in a statement.

Under the 2011 budget, the government expects unemployment to rise to 14.6 percent from an estimated 12.1 percent this year.

The budget will be discussed in parliament and changes can be made before a final vote on December 22. The government has a comfortable majority and is expected to pass the budget easily.

Author: Catherine Bolsover (Reuters, AFP)
Editor: Martin Kuebler

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