Greece announced swingeing spending cuts on Sunday to clinch a €110-billion ($146 billion) international bailout, warning that widespread sacrifices were needed to save the country from bankruptcy.
The government said people would have to work longer before they can retire, public workers would lose year-end bonuses and sales taxes would go up under a deal with the European Union and IMF aimed at averting bankruptcy.
In return, Greece will get around money in loans over three years, according to a draft deal to be endorsed by eurozone Finance Ministers later on Sunday, said a diplomatic source in Brussels.
Unions immediately voiced their dismay and vowed to step up their campaign against the cuts.
“With our decision today our citizens will have to make big sacrifices,” said Prime Minister Papandreou in a televised address during an extraordinary Cabinet meeting, one day after police clashed with protesters angry at the austerity drive.
Yannis Panagopoulos, president of the million-member strong GSEE union, denounced the austerity plan as the “most unfair and hardest measures in the modern history of Greece”.
“They are going to worsen the recession and plunge the economy into a deep coma,” he said. “It's time to step up the social battle, our May 5 general strike will be the beginning of a long battle.”
EU Economic Affairs Commissioner Olli Rehn said he was confident that the Finance Ministers of the 16-nation eurozone would approve the loans.
Greece has been under heavy pressure to cut a massive public deficit that has rattled international markets and sparked fears of contagion to other heavily indebted European countries.
The country faces an urgent need for help with €9 billion in debts due on May 19.
Among the major measures to make the budget cuts, the Greek government is to scrap bonus 13th and 14th month wages (Greece has 14 month payment term) for public sector workers and for retired people from both the public and private sectors, said a Minister.
The retirement age for women will be raised starting next year from 60 to 65, bringing it in line with that for men.
From 2015 workers will have had to pay retirement contributions for 40 years to get their pensions compared with 37 now.
Germany, which had been reluctant to approve a bailout, warned Greece that it must rapidly implement the austerity measures.