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Debt Lands Greece in ‘New Age of Austerity’

With mounting debt putting Greece dangerously close to a sovereign default, the country is under increasing pressure from European Union nations to reign in spending. John Sparks of ITN reports.

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    The people of Greece are being watched, this a country under surveillance. E.U. officials call it reinforced surveillance, and they're worried, anxious that the government will default on its debt and drag down the euro.

    Greek ministers are under special orders from the bureaucrats in Brussels: Slash public spending, raise taxes, and no excuses, please. It's easy to say, much harder to do, however. Yet, today, that ambitious program was tabled in the Greek parliament.

    In this building behind me today, the long road back to respectability begins. But it will be a painful process, and the Greek people are afraid. The big question here tonight is whether they will stand for it. Have the public got the stomach for a new age of austerity?

    George Papandreou, the country's new socialist prime minister, was told the country's annual deficit was two times bigger than previously thought. The finances were such a mess, in fact, his party had to take back every campaign promise it made. His finance minister, George Papaconstantinou, has to find the savings. His new wage and tax measures are vicious, old-style, tough-love economics from a socialist today.

    The government can expect determined opposition.

    "Our struggle will start with big strikes," says Yiannis Panagopoulos. "And our slogan? The needs of the people come before the markets. Our movement will spread through Southern Europe, because government resistance is weak."

    Successive Greek governments used those markets to borrow money, with little thought given to paying it back. The debt was cheap, so why worry?