2010.09.1307:01:00UTC+00Greece PM Rules Out More Austerity Measures

Greece Prime Minister George Papandreou on Sunday ruled out new austerity measures, expressing confidence of achieving the goal as planned by the end of this year.

Papandreou said a debt restructuring would have been catastrophic. By the end of the year, the budget deficit will be cut by 40%, he added.

On Saturday, he said the rate of tax on undistributed profits will be reduced to 20% from 24% next year. He called it as "a powerful incentive for investments and competitiveness." This will create more jobs. Ahead of his speech, thousands of people protested in Thessaloniki, northern Greece, against the austerity measures of the government.

The Greece economy had contracted 1.8% sequentially in the second quarter. Year-on-year decline in gross domestic product was 3.7%, following a 2.3% fall in the first quarter.

Greece with national debt of around EUR 300 billion, plans to cut its budget deficit to 8.1% of GDP this year. The finance ministry said on September 10 that net revenue increased by 3.3% annually in the first eight months of the year, below the annual target of 13.7%. Meanwhile, reducing the deficit, spending dropped 7.7%, better than the targeted 5.5%.

Last week, the International Monetary Fund agreed to grant EUR 2.5 billion loan to Greece. This second installment brought the total disbursement to EUR 8.28 billion.

"The Greek authorities have made a strong start with their economic program, and their determined implementation has started to deliver results," said Murilo Portugal, deputy managing director and acting chair of the IMF's executive board.

Greece's euro exit would only help to worsen its debt burden and would lead to a partial default or restructuring, according to European Central Bank's Executive Board member Lorenzo Bini Smaghi. On September 10, Bini Smaghi said the very idea of dropping euro is "absurd."

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