Greece was poised on Monday to announce a crackdown on corruption and tax evasion in response to pressure from the European Commission and European Central Bank to accelerate economic reforms.
George Papandreou, prime minister, would open a “social dialogue” with representatives of trade unions and the private sector with a policy speech on economic and social problems, officials said.
Spreads on 10-year Greek bonds widened again to about 220 basis points in early trading amid fears the set-piece event would not include the announcement of specific measures to reduce a double-digit budget deficit and rising public debt.
Officials said the prime minister’s speech would cover tackling corruption – the biggest problem Greece faces, according to Mr Papandreou – as well as revenue-raising measures based on a comprehensive new tax law to be submitted to parliament in February.
“The measures will be painful – for those who should suffer pain,” Mr Papandreou said in a reference to widespread tax evasion.
Greece has received repeated warnings to overhaul its faltering economy or risk a possible default on payments on a public debt, expected to reach 124 per cent of gross domestic product next year.
Lucas Papademos, ECB deputy president and Greece’s senior economist, said at the weekend the country’s fiscal position was “exceptionally serious” and the government must take decisive action.
Mr Papandreou’s speech will also cover ways of cutting wasteful public sector spending as well as reforms of the collapsing state pension system, and the opening of “closed shops” in transport and other services.
But the government still appears to be avoiding measures proposed by its European partners that could speed deficit reduction, including a public sector pay freeze, a revival of the privatisation programme and increases in excise taxes.
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