Greece rushes austerity cuts as anger builds

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Greece's socialist government rushed on Monday to push through fresh spending cuts in the face of public anger at the price to pay for the 110-billion-euro international bailout.

A day after unveiling plans to cut public sector bonuses, shake up the retirement system and hike sales tax, Prime Minister George Papandreou said the austerity drive would allow "changes that the country has needed for years".

With the third general strike in as many months called for Wednesday, unions have vowed to battle the latest round of cuts and tax hikes, worth some 30 billion euros (40 billion dollars) over three years.

"These are difficult days, but we have to believe, and I do, that it is an opportunity for a new start, an opportunity for change," Papandreou said before meeting President Carolos Papoulias.

Facing the prospect of defaulting on its debt, the government agreed to the spending cuts and tax hikes as a condition for the 110 billion euros in loans from eurozone countries and the International Monetary Fund.

Eager to keep Greece's crisis from spreading, European governments endorsed the unprecedented international bailout on Sunday after months of hesitation.

With its eurozone and IMF partners behind the plan, the government is to present the new austerity measures to parliament late Monday or Tuesday and aims to get a vote on Wednesday or Thursday at the latest, an official said.

He said that the first installments of bailout funds should begin flowing in time for Athens to honour debts of nine billion euros coming due on May 19.

"We need nine billions euros by May 19, it will arrive in time," the official said. "Everything was done on the basis of this date."

Goldman Sachs economist Erik Nielsen said that although Greece appeared to be "fully financed for the next 12 months" the outlook was less certain in the coming years if social unrest erupted or more cuts were needed.

Newspapers said the cuts marked the beginning of years of painful sacrifice.

"Our way of life, of working, consuming and organising our lives in this part of the Balkans is finished since yesterday," the pro-governmental Ta Nea newspaper said in an editorial.

The main headline of the independent left-leaning Eleftherotypia read "Four years without a breath..."

The package has also proved deeply unpopular in other parts of Europe which will stump up the loans.

In Germany, where Chancellor Angela Merkel's cabinet was thrashing out its contribution to the package, the mass-circulation Bild daily derided what it called the "fattest cheque of all time".

France's Finance Minister Christine Lagarde said the crisis showed the need for changes to the EU stability pact which lays out strict rules for public spending.

"When it ends up costing you 110 billion euros, you do change your approach," she told Le Monde newspaper.

The lingering doubts about Greece's prospects were reflected on the markets with the euro falling in morning trading although it held above 1.32 dollars.

In exchange for emergency loans, Greece has agreed the new cuts over three years with the aim of slashing the public deficit to less than three percent of output by 2014, from 13.6 percent last year.

The government is to scrap 13th and 14th month bonus wages for public sector workers and pensioners, raise the retirement age for women from 60 to 65, bringing it in line with that for men; and raise the sales tax from 21 percent to 23 percent this year.

Rocked by violent street protests at home, Greece has been under heavy pressure to cut its massive public deficit.

The European Central Bank gave embattled Greek banks a hand on Monday, by suspending criteria for lending to them which will make it much easier for the banking system to get affordable financing.

© 2010 AFP

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