Tuesday, March 2, 2010

Greece ready for budget cuts

March 2 (Bloomberg) -- The Greek government will announce as much as 4.8 billion euros ($6.5 billion) of additional deficit cuts tomorrow, bowing to pressure from the European Union and investors to do more to tame the region’s biggest shortfall, a person familiar with the plan said. 

The new measures will include higher tobacco, alcohol and sales taxes and deeper cuts in public workers’ bonus payments, said the person, who declined to be identified because the details aren’t public. Greek bonds advanced for a third day today on the prospect that the deficit measures might ease opposition to EU aid for Greece....

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Comment: Greece has so much slack in its public sector that a cut of $ 6.5 billion of public expenditure is not so painful as it may appear. Like it is healthy for an obese person to slim, the Greek budget cut will strengthen the Greek economy and contribute to making its political life more sound. Even a cut of $ 10 billion wouldn't put the Greek into the poorhouse.

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