Greece braces for more austerity to avert default

Sun Sep 18, 2011 3:35pm EDT
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By George Georgiopoulos and Dina Kyriakidou

ATHENS (Reuters) - Greece on Sunday pledged to take the tough decisions needed to avoid default but announced no new austerity measures to secure international bailout funds next month.

Prime Minister George Papandreou canceled a visit to the United States to chair a cabinet meeting on Sunday, a day before European Union and International Monetary Fund inspectors hold a conference call with Finance Minister Evangelos Venizelos to hear how Greece will plug this year's budget shortfall.

Venizelos told reporters after the meeting Greece needed to fully meet 2011 and 2012 budget targets, stop generating debt and start producing surpluses next year, but did not outline how these would be achieved.

"If we want to avoid default, to stabilize the situation, to remain in the euro zone ... we must take big strategic decisions," he said.

The cabinet will meet again after talks with the EU and IMF inspectors to specify policy, he said. He hinted at steps to further shrink the public sector by saying Greece would focus on cutting state spending rather than generating revenues in 2012.

At stake is an 8 billion euro ($11 billion) loan tranche from a 110 billion euro bailout secured last year, which Greece needs by October before it runs out of money.

Papandreou canceled his U.S. visit to deal with the deepening crisis at home as euro zone partners made clear further funding for the debt-ridden country would hinge on adhering to agreed fiscal targets.

Last week, the government blamed the shortfall on a deeper-than-expected recession and decided to put a new tax on real estate in the hope of collecting about 2 billion euros annually.   Continued...

<p>Police officers stand outside the Greek parliament following an unscheduled cabinet meeting in Athens September 18, 2011. REUTERS/Yannis Behrakis</p>