Athens unveils new austerity plan ahead of fresh bailout
Published 11/06/2011 | 05:00
Greece has unveiled a new austerity programme as its finance minister says it hopes to secure a second bailout deal this month.
George Papaconstantinou defended the new austerity package to be voted on in parliament, saying it was essential to keep Greece solvent.
He indicated that European Union countries may back calls to get the private sector involved.
The measures, unveiled yesterday and worth €28bn, will slap a host of new taxes on austerity-weary Greeks -- in spite of previous pledges to avoid more blanket tax hikes -- and cut public sector staff by a further 20pc. Other key details of the plan will be announced later this month.
"We have a choice between a difficult path and a path of destruction," Mr Papaconstantinou said. "We must fix what's wrong or this country has no future."
With yields on its 10-year bonds at near 17pc, Greece is highly unlikely to return to markets next year -- as its original bailout deal had envisioned -- and is negotiating an additional rescue deal to avoid potential default so it can meet its debt obligations for the years to 2014.
That assistance would be in addition to the €110bn in rescue loans the country is already receiving from other members of the eurozone and the International Monetary Fund.
It is to receive the next instalment, which is worth €12bn next month, but the IMF requires financing guarantees for the next 12 months to continue its payouts.
European countries have been discussing how to resolve the problem with Greece's funding gap, possibly with a second bailout.
Eurozone finance ministers meeting in Brussels on June 20 and EU leaders gathering on June 23-24 are to discuss the issue.
One new element in a second bailout could well be the involvement of the private sector.
There are suggestions, particularly from Germany, that Greece's private creditors agree to swap their current bonds with those with a longer maturity -- the hope being that it will give Greece more time to get a grip on its public finances.
The new austerity measures will slash spending and hike taxes between now and the end of 2015 -- two years beyond the current government's mandate.
They also include a €50bn privatisation drive for the same period.
Measures include a one-off luxury tax on swimming pools and yachts and repatriating money taken out of the beleaguered country.