Greek state pay to be cut

THE European Commission is set to tell Greece to cut public sector wages and improve tax collection this week under a European Union drive to shore up the indebted nation’s finances.

Amid worry Greece’s debt will destabilise the eurozone, the commission is poised to make the recommendation on Wednesday, according to a draft proposal.

Greece will resume battle this week to regain market confidence after being condemned by the commission last month for falsifying public finances data and concealing the size of its national debt.

Greece’s deficit in 2009 was estimated at 12.7 per cent of gross domestic product, the largest in the eurozone and more than four times higher than the three per cent allowed under EU rules.

The Greek government has submitted plans for an overhaul of the tax system, spending cuts, a freeze on hiring civil servants and salary caps for highly paid civil servants. But the commission looks likely to ask it go further, so that even average state wages will be cut.

The commission is also expected to recommend that Greece should crack down on tax evasion, particularly among the self-employed, and possibly introduce a tax on luxury goods.

And Eurostat, the EU’s statistical agency, is set to be given power to audit Greece’s finances.

Top European Union official Joaquin Almunia bolstered public confidence on Friday when he said there was no risk that Greece would default or leave the eurozone. Meanwhile Greece’s finance minister George Papaconstantinou said he was not aware of any bailout talks.