The austerity package is worth up to €4.8bn (£4.36bn) of cuts, ranging from new taxes, a VAT hike and the proposed slashing of public sector pay.
Prime Minister George Papandreou told Parliament yesterday that Greece needed to avert default and a broader eurozone deficit.
“Today we must make tough, harsh decisions which in many cases are unfair. This is not a choice, it’s a necessity,” he told members of his ruling socialist PASOK party. “We will not let the country sink, whatever the temporary cost, whatever the reactions.”
Papandreou has warned the country’s civil servants that they will be the biggest losers from the package.
“The government is forced to ask for the contribution of all citizens, to ask public servants to get by with less,” he said.
He also emphasised that his government was determined not to leave the country at the mercy of market speculators.
The European Commission plans to investigate trading in sovereign credit default swaps (CDS), an activity blamed for exacerbating the pressure on Spanish and Greek gilts.
Greece’s heavy borrowing has had a detrimental affect on the performance of the euro which yesterday fell to its lowest level against the dollar for 10 months. Financial markets have become increasingly nervous about the country’s inability to pay back the debt.