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Austerity plan sends Greek stocks downward

  |   Sept. 12, 2011 at 8:39 AM
ATHENS, Greece, Sept. 12 (UPI) -- Greek stocks slid into the red Monday after the government announced another round of austerity measures.

The General Index lost 2.75 percent at 862.37 units in morning trading, Capital.gr reported.

The downward trend was fueled in part by German media reports about a so-called Plan B to support German banks in case Greece goes bankrupt, and discussions about a possible downgrade of French banks by Moody's because of their exposure to Greek debt.

Banks showed losses of 5.3 percent at 515.31 units

The Greek government announced another round of austerity measures, of roughly $2.7 billion, Sunday as pressure built for the country to deliver on its pledge to reduce its debt.

Finance minister Evangelos Venizelos called the measures, which involve a new two-year real estate tax and holding back a month's pay from all elected officials, a new "national effort," EUobserver.com reported.

"We know that these measures are unbearable," Venizelos said Sunday. "But once more, we all have to rally together in a national effort. Our immediate priority is the full respect of the budget targets for 2011."

The European Commission welcomed the announcement, saying officials from the EU, the International Monetary Fund and the European Central Bank would return to Greece "in the coming days" to review the country's deficit-slashing effort.

"I welcome the expressed commitment by the Greek government to fully meet the agreed fiscal targets this year and next, and to take the necessary consolidation measures to achieve these objectives," Olli Rhen, the bloc's economy commissioner, said.

The turmoil in the European markets left investors preparing for another global stock market downturn this week, The New York Times said.

When announcing the new round of measures, Venizelos warned the Greek economy was expected to shrink more sharply this year than previously expected. A revision indicated a contraction of 5.3 percent in 2011 was predicted, instead of 3.8 percent as forecast in May.

Slower growth could make it harder for Greece to pay its debts, even with the austerity measures.

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