Greece - lost indepenence ?

European leaders appear to have agreed that Greece can cut its VAT rate - (did anybody ask the greeks ? ...sure NOT) - in a move designed to win support for more public spending cuts as the embattled nation prepares for a crunch decision on a second international bailout. Athens was offered the VAT olive branch in a last-ditch effort to win over conservative opposition, which has been demanding tax cuts as the price for agreeing to further EU loans. It believes tax cuts will encourage businesses to expand and help the economy grow. After several days of wrangling, a German source said the so-called troika team of EU, IMF and European central bank inspectors had struck a deal with the socialist government on VAT cuts as part of a wider agreement that Athens will reduce its debts to below 3% of GDP by 2014. "They have agreed on it," the source said. A deal is expected in the next few days, before an EU finance ministers meeting at the end of June. However, political agreement remained elusive after the opposition Democracy party warned that it wanted more than a VAT cut. A party official said: "If correct, it is a good step, but not good enough; it is not sufficient to restart the economy." Greece is expected to miss targets set by the EU last year in exchange for a €110bn (£96bn) bailout. Eurozone governments expect Greece to come up with new measures that will help it cut its deficit at a faster pace. Last year, it posted a deficit of 10.5% and at the current rate the EU estimates it will have a funding shortfall of some 9.5% this year, 2 percentage points above target. By the end of the year its overall debt is likely to reach 150% of GDP. Greece was supposed to raise around €12bn from the debt markets next year to supplement borrowing from the ECB, but with interest rates for 10-year bonds above 16% and estimates that it will need nearer €25bn, that prospect now seems unrealistic.