he announced a 90 per cent tax on bonuses for senior bankers in the private sector and a ban on bonuses for executives at public sector corporations. Obviously we are not talking about Alistair Darling, but Greek prime minister George Papandreou, who, after the markets closed on Monday night, outlined his plan to get the countryâs finances back in shape (along with some populist banker bashing). And itâs quite some diet. Papandreou is aiming to reduce Greeceâs deficit from 13 per cent of GDP to 3 per cent by 2013, and hereâs how he plans to do it: * A Reduction in defence spending in 2011 and 2012; * Cutting bonuses across the public sector; * Reducing social security and government operating expenditure by 10 % each, and salary caps for public utility directors; * Taxes of up to 90 % on large bonuses for private bankers; the closure of a third of Greeceâs tourist offices abroad; * Eliminating cost-of-living increases for public sector workers with salaries of more than â¬2,000; * The introduction of capital gains tax; the resumption of inheritance and property taxes abolished by the previous government; * A crack-down on corruption; a major reform of health care finances; * Bringing immigrants currently working outside the social security system into it. So far, the market seems less than pleased with the plan. From the FTâs global rolling global market overview: The Athens stock market lost 1.3 per cent as investors seemed unimpressed by the Greek governmentâs plans to reduce the nationâs budget deficit. The spread between 10-year Greek sovereign debt and German Bunds jumped above 255 basis points, signalling traders remain concerned about a Greek default. Hereâs Erik F. Nielsen, Goldman Sachâs chief European economist, with his view: Greek PM Papandreau delivered his much anticipated speech this afternoon in Athens ahead of his finance ministerâs road show through Europe later this week. Judged from early market reactions, people were not too impressed. I think there were several good intentions in the speech, including the outline of further fiscal measures to underpin their promise to cut the deficit to 3% over the next four years. But, alas, it was â predictably â light on details, and as always, the devil is in the details, and in this case specifically in the reaction and acceptability of the social partners. Based on early statements, weâll have to wait some 6 weeks before weâll know much on this side, but early reactions were predictably reserved. That said: The new measures outlined today were somewhat on the populist side of matters, and the plan remains vague on the really important structural stuff. I have to say that I am not too impressed with the revenue side. On the spending side, Papandreou seemed to cave in somewhat to the demand (from Brussels and elsewhere) to address the bloated public sector wage bill, which was the single best news. Measures will include a freeze on public sector wages above EUR2,000 a month (however, those below will increase by more than inflation regardless of job and productivity), and Papandreou said that heâll cut additional, supplemental wages by 10% (which is a pretty big deal. And there will be a hiring freeze for 2010, but excluding for the health and education sectors. Finally, he announced a 10% reduction in social security expenditure in 2010. But again, way too many specifics are missing to form a final opinion. Papandreou said that heâll submit the details to the party political leaders, which probably means that we wont know much more in terms of intended details until well into January. Meanwhile, the public sector union leader said that the unions will react when they know the details, around early February. Finally, Papandreou reiterated his pledge to fight corruption in a very structural and substantial way; good news. And JP Morganâs take: Throughout this crisis, we have argued that it is a question of political will and credibility, rather than of feasibility. Nevertheless, that should not detract from the Herculean task ahead. The Greek fiscal deficit was 2.9% of GDP in 2006, but prior to that the Greek deficit has been above 3% of GDP since 1981. The last time that the Greek fiscal deficit fell significantly was in the 1990s: the deficit declined from 14.3% of GDP in 1990 to 3.1% of GDP in 1999. That nine year fiscal improvement involved a tightening of around 1%-pt of GDP a year. Yesterday, the prime minister promised a pace of consolidation around twice as fast over a four year horizon. Although we have few details about how the upcoming consolidation will be implemented, the consolidation of the 1990s involved an increase in taxes as a share of GDP of around 10.4%-pts, and a decline in spending of only 0.5%-pts. Looking ahead, the Greek government is going to provide more detail in the coming weeks: the prime minister stated that âin the next three months we will take those decisions which werenât taken for decadesâ http://ftalphaville.ft.com/blog/2009/12/15/112426/to-loud-applause/?updatedcontent=1 Outsch, outsch, outsch...