Greece reveals plan to recover from debt

ATHENS, Greece - With creditors demanding solutions to Greece's debt crisis and the financial world increasingly on edge, the government yesterday froze pensions, cut civil service salaries, and slapped new taxes on goods such as cigarettes, alcohol, fuel, and precious gems.

Financial markets and the European Union reacted well to the austerity plan, which was valued at 4.8 billion euros, or $6.6 billion. But Greek unions were outraged and planned a protest for today.

Prime Minister George Papandreou warned that unless the new measures won European Union and market backing, bringing down the cost of borrowing for his country, Greece would turn to the International Monetary Fund for aid. Papandreou is heading to France and Germany to try to win their support for the steps.

Such a move would be unpalatable for the European Union, highlighting the bloc's inability to manage the crisis on its own.

"From today, the problem can't be considered 'Greek.' We are doing what we must and more," Papandreou said. "So now, it is the time of Europe."

If the EU and the markets do not respond "as we would wish, because of speculative behavior, our last resort would be the International Monetary Fund."

Greece is already receiving technical help from the IMF, but has not yet appealed for a bailout. The IMF has bailed out EU members Hungary, Romania and Latvia, as well as non-members Iceland, Ukraine, Belarus and Serbia - but never a member nation in the euro zone.

While Athens wants a European rather than an IMF solution, "we cannot close the door at a time when we have not yet safeguarded that the country will continue to borrow . . . at rates that are not outrageous," Finance Minister George Papaconstantinou said.

What Greece wants is a clear indication from Europe that it would receive help if that became necessary, he said.

The IMF in Washington said it approved of the new plan, which is to be voted on in Parliament tomorrow.

French Finance Minister Christine Lagarde said Greece's cuts went even further than those demanded by the EU.

Savings will be split evenly between increasing revenue and slashing spending. Tax increases include a 20 percent increase for alcohol, a 65 percent increase on cigarettes, and raising the sales tax to 21 percent from 19 percent. Cuts include curbing civil servants' pay, cutting bonuses and stipends, and freezing pensions.