George Papandreou Vows EUR10 Billion in Greek Deficit Cuts in EU Plan

“We will do whatever it takes,” Greek Prime Minister George Papandreou said in a televised speech to his Cabinet in Athens today. “Our country can and is obliged to exit as soon as possible this vicious circle of misery. We will not retreat; we will proceed quickly.”

The plan, to be presented to the European Commission tomorrow, aims to cut the shortfall from 12.7 percent of output, more than four times the EU limit, to 8.7 percent this year. That reduction will be achieved even though the economy will contract 0.3 percent, the plan says. The budget deficit will shrink to 5.6 percent next year and 2.8 percent in 2012.

Concern about the Greek government’s worsening finances and the credibility of its economic statistics last month prompted Fitch Ratings, Moody’s Investors Service and Standard & Poor’s to cut the country’s rating and fueled investor concern about a possible debt default. The premium that investors demand to hold Greek debt instead of German equivalents is at 261 basis points, six times more than it was two years ago.