Greece outlines new austerity as debt rises

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ATHENS, Greece (AP) — Greece’s government today outlined the new austerity measures it intends to take over the next two years, as it revised its 2013 budget figures which predict the debt load will increase sharply as the recession deepens into a sixth straight year.

Unions responded by announcing a rare 48-hour general strike for next week, when the new measures demanded by Greece’s international creditors are expected to be voted on in Parliament.

The $17.5 billion worth of cutbacks for 2013-14 include a two-year increase in the retirement age — from the current average of 65 — salary and pension cuts and another round of tax increases, including raising taxes for the interest on bank deposits from 10 to 15 percent.

The vast majority of the measures, about $11.9 billion, will be taken in 2013 and were presented in a new draft of the budget for next year. Parliamentary approval of the measures is essential if Greece is to receive the next installment of its bailout loans — this time a hefty $40.2 billion. Without the funds, the country has said it will run out of money on Nov. 16.

The torturous months of negotiations over the measures with international debt inspectors have severely strained ties in the already uneasy three-party governing coalition of conservatives, socialists and a small left-wing party.

With just days to go before an expected Parliamentary vote on the measures next week, the Democratic Left has insisted it cannot back them. Prime Minister Antonis Samaras has warned that the country will face financial chaos if they are not passed.

Finance ministers from the other 16 countries that use the euro have said they would decide on Nov. 12 whether to give Greece its next batch of bailout loans provided the country agrees to the reforms.

After a telephone conference today, the ministers praised Greece’s agreement to undertake “ambitious and wide-ranging measures in the areas of fiscal consolidation, structural reform, privatization and financial sector stabilization,” and called on Greek authorities to conclude the negotiations as quickly as possible.

Government debt is projected to rise to 189.1 percent of gross domestic product in 2013, above the 182.5 percent predicted in the preliminary draft submitted at the start of October, and up from the 175.6 percent forecast for this year.

The deficit is now projected at 5.2 percent of GDP in 2013, up from 4.2 percent predicted in the preliminary draft of the budget — but still an improvement from the 6.6 percent predicted for this year.

The recession, meanwhile, will be deeper than the 3.8 percent contraction the preliminary draft had predicted, with the new figures estimating the economy will shrink by 4.5 percent.

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