Greece gambles on tough spending cuts
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Weeks of fretting over Greece's economic woes came to a head yesterday as the country's PM unveiled tough new measures to slash spending. But that was just the beginning. Today Athens was hauled up before a European Commission worried that Greece's debt problems could jeopardize the entire Eurozone.
Greek Prime Minister George Papandreou made a televised appeal last night for his countrymen to accept drastic public spending cuts in order to pull the country back from "the edge of an abyss".
Public sector pay freezes and higher fuel taxes are just some of the painful measures Greeks must face if the country is to cut its €300 billion debt and reduce its budget deficit - which is currently over four times the limit permitted under Eurozone rules.
The European Commission today gave its backing to Mr Papandreou's "ambitious" plan to get the Greek economy back on track by 2012. But this support came with the proviso that Athens accepts an unprecedented level of monitoring, submitting on reports the state of the Greek economy every three months to the Commission.
The fear is that if the Greek economic crisis tips over into bankruptcy, this will have serious knock-on effects in other Euro member states. Analysts say Spain and Portugal, who have also joined Greece in breaking the budget deficit limit, are particularly vulnerable.
At home, Mr Papandreou also faces a tough job of winning the public over to his belt-tightening measures. His government, which only came to power last October, is already struggling in the face of the economic crisis and violent protests over police brutality. As the cuts bite, the Greeks may well feel compelled to take to the streets once again.
