MercoPress. South Atlantic News Agency

Europe welcomes Greek austerity plan, but Athens demands “solidarity”

Prime Minister George Papandreou hikes taxes and freezes pensions

Europe has welcomed a 6.6 billion US dollars Greek austerity plan of pension freezes and tax hikes as the country mounts a frantic bid to cut its budget deficit. Hundreds of pensioners hit the streets after Prime Minister George Papandreou revealed the hit to public and private sector retirement plans.

He also unveiled increases in sales tax and duty on tobacco and alcohol, while a 30% cut in public sector holiday allowances is also being introduced. The Socialist government said it hoped to muster an additional 6 billion USD from the new measures, which amounts to about 2% of GDP.

Mr Papandreou said the cuts were needed “so that Greece can exit the vortex of speculators and defamation, so that we can breathe and keep on fighting”. He added “these decisions are necessary for the survival of the country and the economy“.

The prime minister, who has warned Greece risks bankruptcy if it did not come up with credible measures, said he expected ”solidarity“ from Europe as he prepared to go cap in hand to France and Germany.

Jean-Claude Juncker, head of the Euro-zone finance ministers, hailed the plan and said Europe was ready to offer financial aid if needed. He said the measures announced in Athens offered ”a strong signal of the readiness of the Greek government to proceed with courageous decisions“.

Mr Juncker said: ”Greece's ambitious program to correct its fiscal imbalances is now credibly on track.“

In related news the French Finance minister told Sky News that she sees no immediate need for a bail-out of crisis-hit Greece. Speaking on Jeff Randall Live, Christine Lagarde said that, although there is no current call for a rescue, help would be available if needed.

”There is no need for such a thing at this point in time and don't forget that the European Council that took place a couple of weeks ago said very explicitly that if it was required...in case of emergency, the partners in the club would be available to restore stability,“ she said.

”If there is a need then there will be a way and that is exactly what we have been exploring but there is no such need at the moment.”