Greece to slash jobs, trim deficit

The 17 countries that share the euro currency met in Luxembourg last night in an effort to reach an agreement on releasing the bailout funds, which have been blocked for the past month.

Divided euro zone ministers will seek to avert a Greek default, which could send sharemarkets into a panic, deal an unprecedented blow to the euro and push the world back on the brink of a fresh financial crisis.

The British Prime Minister, David Cameron, warned the euro zone should act decisively as it was posing "a threat to the worldwide economy".

Mr Cameron said it would be "very bad" for Britain if the euro zone broke up, given that it accounted for 40 per cent of British exports.

After an extraordinary cabinet meeting on Sunday, the Greek government announced its budget deficit should drop to 8.5 per cent of gross domestic product this year from 10.5 per cent last year and to 6.8 per cent of GDP next year.

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

Following consultations with the European Union and the International Monetary Fund, the government also revealed a plan to shrink the bureaucracy by placing 30,000 civil servants temporarily in a "labour reserve".

Civil servants' jobs are protected by Greece's constitution, but the government overcame the obstacle by placing in reserve those workers close to retirement and scrapping various state organisations.

Greece estimates this move will save it ?300 million next year.

The country is labouring under a crushing ?350 billion debt, with its stripped-bare economy on its knees, and the government says it needs the bailout loan to pay salaries and other bills this month.