Greece is to take €6bn (£5.2bn) worth of new, emergency fiscal measures to shrink its budget hole and jump start privatisations to convince lenders it can pay down debt without a restructuring.
Policymakers in Brussels and the European Central Bank are piling pressure on Athens to redouble its efforts to cut deficits and push reforms to fix the economy's woes after falling behind targets set in its €110bn bailout plan.
During a marathon meeting that lasted more than seven hours, Prime Minister George Papandreou and his cabinet went over a raft of new austerity measures, including deeper cuts in public sector wages, more consumer tax increases, and even the taboo issue of dismissing full-time civil servants.
"The cabinet today reaffirmed its determination to continue with the fiscal consolidation program by taking additional measures of 2.8 per cent of GDP to achieve the 7.5 per cent deficit target for 2011," Finance Minister George Papaconstantinou said.
Details of the mid-term fiscal plan will be spelled out after EU, IMF and ECB inspectors conclude a performance review. Papandreou will hold meetings with leaders of the political opposition on Tuesday, seeking to build consensus on the effort.
First in line in the government's €50bn privatisation programme to pay down its debt mountain will be divestments in Hellenic Postbank, OTE Telecom and the country's two biggest ports.
Athens expects to raise €3.5bn to €5.5bn from privatisations this year, including its entire 75 per cent stakes in Piraeus and Thessaloniki ports and the Thessaloniki water company.
"To accelerate the process, the creation of a sovereign wealth fund composed of privatisation and real estate assets was also decided," Papaconstantinou said.
City A.M. Reporter