Gov’t to unveil tough measures
The government is expected today to unveil the details of the additional steps it intends to take to help lower its massive budget deficit and assist heavily battered Greek bonds and stocks in rising. Greece is reacting to heavy pressure from its European Union peers and markets to take further steps to ensure it meets its goal of reducing the deficit by four percentage points this year. Prime Minister George Papandreou has confirmed that a third set of austerity measures will be announced but stopped short of revealing any details. Government sources, however, have said the reforms will be to the tune of between 4 to 4.8 billion euros and will include spending cuts and tax increases. Among the measures under consideration are an increase in value-added tax, broadening the luxury goods tax, a further fuel duty hike, a freeze in public sector pensions and further cuts in spending on public servant’s salaries. An EU endorsement of the austerity measures during Papandreou’s scheduled visit to Berlin on Friday could help calm jittery markets and bring down the cost of borrowing for Greece ahead of a planned bond sale. The spread between the 10-year German Bund yield and its Greek equivalent narrowed as much as 19 basis points yesterday to 297 basis points, the first drop to below 300 basis points since February 12. The cost of insuring against a Greek default fell 32 basis points to 313 yesterday, according to CMA DataVision prices. Investors on the Athens bourse also seemed to be more upbeat yesterday, pushing Greek stocks 2.65 percent higher on bank-led gains. Meanwhile, in midday trading in New York, the 16-nation currency slipped to $1.3550 from $1.3574 late Monday. It had dropped as low as $1.3435 in earlier European trading, its lowest point since May 2009. «The euro spiked on the news from Greece,» Dean Popplewell, an analyst in Toronto at the online currency-trading firm OANDA Corporation, told Bloomberg. «Greece is basically having to appease the European Union and the euro is… holding its own.»
