On Wednesday, the Greek Cabinet announced a package of cuts aimed at reducing the public deficit by 2% of GDP. Among the new measures the government plans to institute are pay and benefits cuts of 12% to 30% for public sector employees, 30% to 50% cuts in bonuses and overtime pay, and the discontinuance of executive bonuses in the public sector. As Prime Minister George Papandreou pointed out in a speech Tuesday, 52% of government revenue currently goes to public sector wages and pensions. VAT is expected to rise 1% to 2% overall, with additional taxes on fuel, liquor, cigarettes and other luxury items. Personal income tax on individuals making more than EUR100,000 and property taxes on offshore corporations will also increase. The ultimate goal is to reduce the country's deficit to below 3% of GDP by 2012.

The European Central Bank issued a statement welcoming "the convincing additional and permanent fiscal consolidation measures" that "demonstrates the strong commitment of the Greek Government to achieve the fiscal objectives enshrined in its stability programme." The International Monetary Fund also applauded the move.