Greece resets debt goals

The 17 countries that share the debt-challenged euro currency met in Luxembourg overnight to try and reach agreement on releasing the bailout tranche, which has been blocked by auditors for the past month.

Divided eurozone ministers will seek to avert a Greek default, which could send sharemarkets into a panic, deal an unprecedented blow to the European currency and bring the world back to the brink of a fresh financial crisis.

British Prime Minister David Cameron has warned that the eurozone must act decisively as it was posing "a threat to the worldwide economy", he told BBC television.

After an extraordinary cabinet meeting late on Sunday, the Greek government announced that its budget deficit should drop to 8.5 per cent of gross domestic product in 2011 from 10.5 per cent last year, and in 2012 to 6.8 per cent of GDP. Both deficit targets hover above the initial forecasts fixed in June of 7.4 per cent of GDP in 2011 and 6.5 per cent in 2012.

"This marks the country's entry into another financial phase," the Finance Ministry said of the outlook for 2012 when Greece should record for the first time a primary surplus of ?3.2 billion.

"The additional measures that have been decided and announced for 2011 and 2012 amount to ?6.6 billion."

Following its consultations with EU and IMF auditors, the government also unveiled a plan to shrink the bureaucracy by placing 30,000 civil servants temporarily in a "labour reserve".

Greek civil servants' jobs are protected by the constitution, but the government overcame the obstacle by placing those workers close to retirement in reserve and scrapping various state organisations and putting their employees in reserve.

Finance Minister Evangelos Venizelos said the government had developed the scheme effectively laying off state workers with "transparent and objective" criteria.

EU-IMF auditors spent the weekend in Athens trying to obtain the most accurate picture of Greece's finances, after protests, including staff occupations of ministries, meant a slow resumption of negotiations last week.

Athens is labouring under a crushing ?350 billion or more of debts, and the government says it needs the bailout loan to pay salary and other bills this month.

Mr Cameron told the BBC it would be "very bad" for Britain if the eurozone broke up, given that 40 per cent of British exports went to those 17 countries.

The United States and other major economies are showing growing signs of concern that Europe is too divided to solve the Greek problem or deal with problems in the much bigger Italian economy, and adequately recapitalise banks that lose heavily in the event of default.

Outside Europe, the fear is that a ricochet effect could charge through global financial markets as data increasingly points towards renewed recession.