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Greek ministers approve new austerity measures

By Nicholas Paphitis

Associated Press

Published: Thursday, June 9 2011 1:11 p.m. MDT

A demonstrator is seen through a hole in a banner with anti-government slogans during a protest march against the Greek government's austerity measures and privatization plans, in Athens on Thursday, June 9, 2011. Workers at state-run companies walked off the job Thursday, as the Cabinet was due to discuss further cutbacks in Greece's renewed push to meet the terms of its international bailout.

Petros Giannakouris, Associated Press

ATHENS, Greece — The Greek Cabinet on Thursday approved and submitted to Parliament a new round of painful austerity measures and a €50 billion ($73 billion) privatization drive that are essential for the debt-ridden country to continue receiving funds from its international bailout.

The country is lagging behind with reforms promised in return for last year's €110 billion ($160 billion) package of rescue loans from its European partners and the International Monetary Fund. Fellow eurozone governments have warned that if Greece does not enforce new austerity, it will be cut off from aid.

Without the next €12 billion installment from its rescue loans due in July, Greece, which remains stuck in recession and locked out of international bond markets, will default on its massive debts.

Finance Minister George Papaconstantinou said the plans were approved by the Cabinet and submitted to Parliament.

"The medium term framework includes interventions to achieve a deficit of 7.5 percent of GDP (gross domestic product) in 2011, and broader interventions to reduce the deficit below 3 percent of GDP by 2014, and around 1 percent for 2015," he said. "It also advances the broader privatization program."

No specific date has been set for a vote, but three Cabinet officials said they expected it to be held before June 28. They spoke on condition that their names would not be used, as the measures had not yet been formally made public.

The governing Socialists hold a six-seat majority in the 300-member legislature, but many party backbenchers have strongly criticized the new austerity plan — which follows a series of pension and salary cuts last year, accompanied by increases in taxes and retirement ages.

However, none of the disgruntled Socialist lawmakers have openly threatened to vote against the measures.

Once the measures are approved, the government will table supplementary legislation on their precise implementation. Officials say both pieces of legislation must be ratified before Greece can receive the next installment of the EU and IMF loans.

The new plans include a remedial €6.4 billion ($9.4 billion) package of cuts and tax hikes for this year, a renewed €22 billion ($32.15 billion) austerity drive for 2012-2015 and the privatization program. Officials said all Greeks earning more than €8,000-10,000 annually will be charged an extra tax worth up to 3 percent of their income every year for the next four years, while the sales tax on restaurants and bars will increase to 23 percent.

Civil servants and pensioners are expected to suffer more income cuts, while health, education, defense and social spending will be further curtailed.

"We have sought and we have found the fairest possible solution" in the new austerity cuts, Prime Minister George Papandreou said, according to another Cabinet official who was reading from a text of the premier's remarks.

Eurozone finance ministers meeting in Brussels on June 20 and EU leaders gathering on June 23-24 are to discuss Greece's situation.

"We expect the Greek parliament to approve the measures put forward by the Greek authorities in the last review of the troika, so that the euro area finance ministers can take this into account when they decide on the next disbursement," Amadeu Altafaj-Tardio, a spokesman for the EU's Monetary Affairs Commissioner Olli Rehn, said in Brussels shortly before the Cabinet approval.

In Athens, Cabinet officials said details of the measures would be announced later Thursday. One official said they included an extra income tax levy of between 1 and 3 percent, depending on base salary, for the next four years, and retroactively applicable to last year.

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