Greece to consider 30-35 pct cut in public bonuses

The Greek government will look at trimming public sector bonuses by 30 to 35 percent when it meets to decide on new ways of cutting budget spending on Wednesday, government officials said.

Pressured by the European Commission and financial markets, Greece is set to announce additional austerity measures to ensure its aim to cut the deficit by four percentage points to 8.7 percent of gross domestic product will be met.

Expectations that economic activity will be weaker than the 0.3 percent contraction the government has officially forecast for this year have resulted in EU calls for additional steps to avoid slippage from key fiscal targets.

"The basic proposal is for cuts of 30 to 35 percent in the Christmas, Easter and vacation bonuses," one senior government official who declined to be named said before the cabinet meeting began at about 0800 GMT.

Most wage earners in Greece get Easter, Christmas and vacation bonuses which amount to two additional monthly salaries. Such cuts could generate savings of about 0.7 billion euros. The cabinet will also consider proposals to raise the VAT tax to 21 from 19 percent, another official said.

An increase in VAT tax by two percentage points to 21 percent may generate additional budget revenues of about 1.4 billion euros or 0.6 percent of GDP, economists say.

Greek officials told Reuters last week that the EU believed another 4.8 billion euros in savings were needed to be found to meet its budget goals