Greece unveiled tax hikes and salary cuts for government workers Wednesday, the debt-addled country's most serious steps yet to get ahead of its widening debt crisis.

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Greek Prime Minister George Papandreou speaks to reporters after meeting President Karolos Papoulias in central Athens, Greece, on Wednesday. Papandreou's socialist government announced painful new austerity measures to deal with an unprecedented financial crisis that has hammered the euro and driven up Greece's cost of borrowing. ((Petros Giannakouris/Associated Press))

Concerns that the EU member might default on its loans has sparked fears that it could topple other wobbly European economies.

Greek Prime Minister George Papandreou outlined the drastic measures early Wednesday. The cuts are expected to save the government $6.8 billion annually, or two per cent of the country's GDP.

Tax hikes on alcohol, cigarettes, luxury cars, yachts, precious stones and leather goods will bring in some $3.4 billion annually, while salary rollbacks and pension freezes on government workers will save the same amount.

Greek workers have already staged multiple general strikes in the last 10 days, even before the harsh new proposal was pitched Wednesday.

Greece has come under intense pressure from the European Union to tame its finances, which include a budget deficit that stood at a staggering 12.7 per cent of gross domestic product in 2009. Athens has promised to reduce it to 8.7 per cent this year, but many economists consider that goal unrealistic.

The cuts are aimed at winning European Union support for the country's efforts and possibly opening the door to a financial backstop by fellow European governments. That could then lead to a badly needed bond issue, as Greece has $54 billion euros worth of debts coming due in the next little while.

Greek officials received non-binding verbal support from other European leaders, but stopped short of ruling out IMF intervention.

"Obviously we would like EU solidarity and whatever support there would be to come from within the eurozone. But we cannot responsibly say that the IMF option, as much as we do not want it, can be ruled out," Finance Minister George Papaconstantinou said.

Papandreou is due to hold talks with German Chancellor Angela Merkel on Friday and will travel on for meetings with Presidents Nicolas Sarkozy in France and Barack Obama in the United States.

Bond ratings agencies liked the plan. Moody's said it was a "clear manifestation" of resolve to regain control of Greece's strained public finances and increase the probability that the debt situation in Greece will be stabilized.

The approval from Moody's and Standard & Poor's is crucial to taking pressure off Greece's finances while it restructures.

With files from The Associated Press