Greece Says New Austerity Measures Needed

Posted September 21st, 2011 at 9:35 am (UTC-5)
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Greece's finance minister says the debt-ridden country needs to adopt new austerity measures before its international creditors will hand it more money to avoid a default next month on its bailout loans from last year.

Greek Finance Minister Evangelos Venizelos told Parliament Wednesday that the nation has not fully grasped its economic peril, and that the national economy “could cease operating” if it fails to approve more spending reforms. The Wall Street Journal reported that international creditors are demanding more than $8 billion in new austerity measures.

The government said it would propose a new cost-cutting plan later in the day, on top of previous tax increases and budget trims. It is an effort aimed at securing an $11 billion segment of last year's $159 billion bailout from the International Monetary Fund, the European Union and the European Central Bank. The bid also aims to keep the Athens government from running out of money.

But there is rising discontent among Greeks as the government seeks to meet the demands of international financial markets to correct years of deficit spending. Greek transportation workers have called for a one-day protest strike on Thursday, and the country's two biggest labor unions have scheduled 24-hour strikes for October 5 and 19.

Greece is mired in the third year of a recession, with its economy projected to shrink 5.5 percent this year. With the economic contraction, tax revenues have fallen, making it more difficult for the government to meet the terms of the bailout agreement.

Venizelos issued his new warning about the country's financial peril just hours after completing a second round of debt talks with Greece's creditors. The EU reported that good progress was made along with the agreement for inspectors to return to Greece to continue their review of economic reforms.

Despite Greece's financial woes, Venizelos vowed after the meeting that “Greece is and will always be a member of the eurozone,” the bloc of 17 nations that uses the common euro currency.

But it is up to the inspectors to determine if Greece is meeting lenders' demands for spending cuts and a smaller government and whether it can receive the next loan installment.

Greece is deep in debt and has already slashed government spending, laid off thousands of civil servants, and imposed new taxes to close its budget deficit.

An IMF statement says Greece has made impressive progress. The IMF said Greece's European partners will stand by Athens as long as it continues to pursue sound policies. The statement said, “The ball is in Greece's court.”

Discussions about the Greek economy are to be discussed at this weekend's annual IMF meeting in Washington.