Greece is trying to reassure markets about its economy The Greek prime minister has unveiled a series of spending cuts, warning that the country is at risk of "sinking under its debts". George Papandreou said the planned cuts would include a 10% cut in both social security spending, and overall government operating expenditures. Calling for national unity, he vowed to reduce Greece's public deficit from the current 12% to under 3% by 2013. He also announced a 90% tax on the bonuses of senior bank workers. ANALYSIS Malcolm Brabant, BBC correspondent in Athens. This was a speech that was designed to appease international markets and European central bankers. Mr Papandreou said there were certain moments in the history of a nation when the choices made defined the time to come. Today was such a moment he said. Then he announced what the government described as sweeping structural reforms. These included a 10% reduction in both government operating expenditures and social security expenditure. Mr Papandreou's Socialist government will try to convince the unions and opposition political parties that the cuts he has proposed are in the national interest. The Conservatives are likely to concur, but left-wing groupings have already indicated that they will fight the government. Other proposals include a cut in defence spending, pay and hiring freezes for public sector workers, and the closure of a third of Greece's overseas tourism offices. "We must change or sink," said Mr Papandreou, in a speech to business and union leaders. He added that Greece had "lost every trace of credibility" and the country had to "move immediately to a new social deal". Indicating that some spending cuts would be painful, he said that "we must all lose our comfort". 'Not Iceland' Mr Papandreou's comments come a week after international ratings agency Fitch downgraded the country's credit rating - meaning that it thought Greece was now a riskier place to invest. Finance Minister George Papaconstantinou earlier defended Greece's position in the eurozone, despite its deficit being far above the European Union limit of 3%. He said Greece was worthy of its place because it "abides by the rules" and was "not the only eurozone country with a deficit of that order". Mr Papaconstantinou told the BBC: "Greece is not the next Iceland, nor is it the next Dubai... it is tackling the very serious situation that we have. "It is doing it with specific measures that cut expenditure and increase government revenue and also it is a government which is immediately tackling long-term structural problems," he added. Since last week's decision by Fitch, Greece has come under increasing pressure to take action over its deficit from the European Central Bank.

However, Collin Ellis, European economist at Daiwa Securities, says that "the idea that the euro area is on the the brink of losing Greece and possibly other members is simply absurd". He believes there is still time for the Greek government to sort out its finances, and, should it not be able to, "it is inconceivable that other euro area member states and, if necessary, international organisations would not step in". The country's public debt stands at 300bn euros ($442bn; £269bn).



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