The Greek Prime Minister George Papandreou announced new measures his country will take in order to bring down its budget deficit and assuage markets about the solvency of Greek’s sovereign debt. The measures will including spending cuts and tax increases, including higher fuel, tobacco and sales taxes. There will be cuts in salary bonuses to civil servants and a freeze in state pensions. All together the cuts and taxes are expected to raise €4.8 billion ($6.6 billion).

The markets took the news well, as Greek bonds rose to the highest in three weeks on the measures and the Euro rallies higher during the session, with the EUR/USD moving above the 1.37 level for the first time since February 17th. How Greeks will take the news is another matter as the prime minister will face a strong backlash and Greek unions have been protesting the freezes in salaries and benefit cuts by calling for strikes.

The cuts are a prelude to possible financial assistance Greece may need from the EU, and the steps annoucned today shows that Greek officials are responding to EU suggestions. Papandreou is set to meet with Germany’s Chancellor Angela Merkel on Friday, but it seems that an announcement on an EU aid package for Greece is not in the works for that meeting. Market participants had held out some hope that something would come from that meeting in terms of a concrete bailout.