Greece has sealed a deal with the EU and IMF that opens the door to a multi-billion euro financial bailout and will require big sacrifices from the Greek people, Greek Prime Minister George Papandreou said yesterday.
Those sacrifices amount to budget cuts of 30 billion euros (US$40 billion) over three years, on top of measures already agreed and aimed at bringing a towering budget deficit back to the EU limit by 2014.
The government told Greeks, that they had to choose between a rescue or an economic collapse.
The aid package, expected to total up to 120 billion euros over three years, represents the first rescue of a member of the 16-nation eurozone and is aimed at stemming a debt crisis that has shaken markets worldwide.
“It is an unprecedented support package for an unprecedented effort by the Greek people,” a somber Papandreou told a televised Cabinet meeting.
“These sacrifices will give us breathing space and the time we need to make great changes,” he added. “I want to tell Greeks very honestly that we have a big trial ahead of us.”
Finance Minister Giorgis Papaconstantinou gave details of the agreement before heading to a meeting yesterday with his eurozone counterparts in Brussels, where the aid package is expected to win the bloc’s formal backing.
“We are all being called to make a choice,” Papaconstantinou said. “The choice is between collapse or salvation. The choice is between fleshing out a very ambitious and difficult three-year program of fiscal consolidation, a program of structural reforms ... or the country reaching an absolute dead end.”
Athens promised to slash its budget deficit to the EU limit of 3 percent of GDP by 2014 from 13.6 percent last year.
Salaries and pensions in the public sector would be frozen during the three-year program while a fund backed by the IMF and EU would be set up to help Greek banks. Value-added tax and duties on fuel and alcohol will rise sharply.
Papaconstantinou forecast Greece’s public debt would soar to nearly 150 percent of GDP but then start falling from 2014. However, the plan would cover a large part of Greece’s borrowing needs for the next three years, with Athens returning to commercial borrowing when “appropriate.”
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