• More cuts and privatisation in 'roadmap' for stricken Greece
• Economist Nouriel Rubini insists default is inevitable
With the Greek economy pounded by international markets, predictions of a sovereign default growing daily and his own parliamentarians riveted by dissent, prime minister George Papandreou attempted to steer the country out of worsening fiscal crisis by announcing a "road map" to recovery.
Nearly a year after debt-stricken Athens was rescued by eurozone nations and the IMF with the biggest bailout in history, the leader pledged further budget cuts and an unprecedented €50bn (£44bn) privatisation drive to rejuvenate Greece's dire financial health.
"Today we are presenting the basic guidelines of a roadmap that will lead us from the Greece of crisis to the Greece of creativity," he said in a keynote speech. "The plan will be completed and enriched in the coming weeks."
But while Papandreou also promised a root-and-branch "restructuring" of the EU state, the deficit-cutting drive did little to allay concerns that Athens is coursing towards default.
Instead, it appeared to reinforce fears that Greece is on the brink of being unable to manage its ever-expanding debt in an environment that, politically and economically, has become increasingly explosive.
Nouriel Rubini, the world renowned economist, has insisted that it was not a question of "if" but "when" the country defaults on a public debt projected to reach 159% of GDP by 2012.
"The issue of Greece is not whether there will be debt restructuring, but when it will be done," said Roubini who earned the moniker of Dr Doom after predicting the global financial crisis.
Highlighting the growing perception that Europe's paymaster, Germany, is coming round to the idea of a debt restructure, Berlin's deputy foreign minister Werner Hoyer told Bloomberg that such a scenario "would not be a disaster."
Greek officials beg to differ, saying the heightened speculation is catastrophic at a time when the country is trying to attract foreign investment. No western state has defaulted on its debts in nearly six decades.
Getting worse
On Thursday, premiums on Greek debt rose to a record high after the German finance minister Wolfgang Schäuble forecast that restructuring could be required by the end of the year. Despite receiving €110bn in emergency loans and enforcing draconian fiscal consolidation measures in exchange, Greece's 2010 deficit is expected to be revised upwards in the coming weeks.
"The macro-economic indices just keep getting worse," said Professor Theodore Pelagidis, whose account of the Greek economy, From Boom to Bust, has become a bestseller. "The recipe for recovery in the case of Greece has simply not worked. For the first time in the history of the IMF every forecast made has been off-target. Too much emphasis was put on horizontal cuts in the public sector and collecting direct taxes. The recession [as a result of austerity] has been much deeper than predicted."
The economic gloom and growing public dissent has created rising discontent among the governing socialists with many openly disagreeing with the latest measures. The fiscal plan foresees a further €26bn being saved by sell-offs, benefit cuts and tax increases over the next four years to bring the budget deficit down from just over 10% in 2010 to around 1% in 2015. Spending in the public sector will also be dramatically pared.
The Greek finance ministry said that its long-awaited privatisation programme will begin with the sale of an additional stake in the state-owned telecommunications company OTE to Deutsche Telekom and 10% of the Public Power Corporation. Regional airport and port authorities will also be sold off to cover fiscal shortfalls.
The measures must be passed by parliament first. Failure to vote them through the 300-seat house when it votes on the mid-term fiscal plan next month could force early elections.