Greek PM says country is sinking under its debts

Greece’s recently elected socialist government is to create a new social deal as it battles the country’s worsening financial crisis.

Calling for national unity, the new administration has vowed to reduce Greece’s public debt deficit from the current 12 percent to under 3 percent by 2013.

In a long awaited speech Prime Minister George Papandreou said the country was sinking under its debts.

“I have already stressed that I do not plan to take half measures, that focus on the wrong problems, and the wrong groups which carry no responsibility, for this financial crisis. It might seem easier, to cut down on wages and pensions, in order to satisfy a certain international financial elite, but the problem is not there,” said the prime minister.

Last week Greece’s credit rating was down graded to its lowest in ten years, indicating the country was a risky place to invest. Since then the government has been scrambling to reassure EU partners it would get a handle on its finances.

The planned cuts which include a 10 percent slash in social security spending will do nothing to off set a growing anger. But Papandreou has also pledged to cut bureaucracy, hit banker bonuses and to increase the tax burden on the rich.