Greece's government was considering further cuts to defence spending and public sector salaries on Tuesday to secure approval for a multi-billion-euro EU/IMF rescue package, government sources said. The cuts were on the agenda of a cabinet session chaired by Prime Minister Lucas Papademos that began at 4 pm (1400 GMT).
The government is rushing to find 325 million euros in budget cuts to satisfy euro zone finance ministers due to decide on Wednesday whether to sign off on a 130-million-euro ($172 billion) bailout to save the country from a chaotic default. With Europe deeply sceptical that the Greek leadership will stick to the terms of the deal, political leaders are also under pressure to produce written commitments by the Wednesday meeting.
The as-yet unspecified 325 million euros were written into 3.3 billion euros of cuts in wages, pensions and jobs endorsed by parliament on Sunday as rioters torched buildings in Athens and fought running battles with police. But the European Union and International Monetary Fund want Greece to account for every cent before they approve the rescue, which includes a bond swap cutting the real value of private-sector investors' bond holdings by some 70 percent.
Two government sources, who declined to be named, said the cabinet was considering trimming 125 million euros from the defence budget, already cut by 300 million in the austerity bill adopted by Sunday. A further 200 million would come by bringing forward public sector salary cuts. "That is what is being discussed but there is no final decision yet," a government official told Reuters. The sources said ministers were also looking at cutting funding for local municipalities. Athens needs the funds to avoid a disorderly default when 14.5 billion euros in debt repayments fall due on March 20.
But the punishing austerity measures are fuelling social turmoil in Greece, where unemployment hit a high of 20.9 percent in November and half of young Greeks are jobless.