Greece faces huge budget cuts

The European Commission has welcomed radical plans by the Greek Government to cut the country’s growing budget deficit.

However there is growing concern regarding the way Greece reports its statistics.

Greece's budget deficit is currently one of the highest in the European Union standing at 12.7 per cent, four times the legal limit for an EU country.  By comparison, the UK has a budget deficit of 13%.

It is thought that Greek Prime Minister George Papandreou has come under intense pressure from Brussels to cut the deficit.

Concern

At last week's World Economic Forum in Davos, the Greek Government pledged to cut its budget deficit to 8.7% of its GDP.

There is concern that if reform plans are not introduced soon, Greece's economic problems could spill over into other EU member states.  The continued stability of the Euro is also of great concern.

The EU's Economic Affairs Commissioner Joaquín Almunia has said that strict measures will be put in place to ensure Greece reports accurate financial figures. 

In the past, there has been significant suspicion surrounding Greek finances.  One of the conditions set by the EU before backing the plan is intrusive inspection of economic data.

Protests

Commission President Jose Manuel Barroso described Greece's situation as "A deficit of such a magnitude must be decisively corrected".

Trimming the deficit will require huge cuts in public spending.  The Greek Government has already announced a 10% cut in public sector pay, saving between €150-€200 million and an increase fuel duty, which should raise €1 billion.  Taxes are expected to rise and welfare benefits and are also in line for cuts.
 
Protests are being planned in opposition to the planned reductions.  Greece has a history of popular protest and reforms have in the past been blocked following public opposition.

However, Prime Minister George Papandreou has pledged to persist with the planned financial reductions.

European Commissioner for Economic and Monetary Affairs Joaquin Almunia announces his support for Greek reform plans