Greece announces new budget cuts for 2011

Greece's Finance Minister Evangelos Venizelos gives a press conference in Athens on September 2, 2011.

For the country to be able to meet its obligations, "there is a shortfall of about two billion euros which must be covered," he said on Greek television. "And the only effective measure is a special tax on real estate."

The minister said this "new national effort" was crucial given the unfavourable perception of Greece abroad, with renewed rumours of a debt default or Greece's possible exit from the Eurozone.

Eurozone leaders announced a 159-billion-euro ($223-billion) rescue package for Greece in July, but many Greeks fear the stringent conditions set for the money to trickle down will only make unemployment worse.

"Our immediate priority is the full respect of the budget targets for 2011," Venizelos said, with a deficit of 17.1 billion euros "including debt servicing" and "14.9 billion for 2012."

He stressed that Athens would continue to work as scheduled with the EU, the European Central Bank and the International Monetary but he pointed to "a changing landscape due to the position of some very important countries and with a decisive role in the Eurozone".

German Chancellor Angela Merkel has called on the Greek government of Prime Minister George Papandreou not to waver in his reform drive.

"Greece knows that credit is only available if it meets its obligations," she said in an interview with the Sunday edition of Berlin's Tagesspiegel newspaper.

German Finance Minister Wolfgang Schaeuble however doubts that Greece can avoid bankruptcy and is preparing for a scenario where the debt-stricken nation becomes insolvent, the Spiegel magazine reported on its website Saturday.

Spiegel said that German finance ministry officials are contemplating two scenarios should Greece become bankrupt: one where the country stays in the eurozone, and another where it re-introduces its former currency, the drachma.

Merkel, in her interview, appealed for greater European integration to resolve the grave debt crises plaguing Greece and other nation's on the continent.