The Greek government has agreed to reduce its budget deficit for this year by implementing a series of spending cuts amounting to 6.4-billion euros, according to an Athens official who spoke to Reuters.

The new budget plan also calls for more tax increases and fewer tax exemptions.

The proposal comes as Greek officials are finishing up talks with European Union, European Central Bank and International Monetary Fund figures over what steps Greece needs to take in order to guarantee delivery of the next tranche (valued at 12-billion euros) of bailout funds to the cast-strapped country.

Greece agreed to a massive 110-billion euro bailout last May, but it is parceled out in pieces, subject to Athens meeting certain budget deficit and debt reduction requirements.

There has also been speculation that Greece may receive an entirely new second round of bailout financing in order to keep the country afloat into 2013.

There have been widespread skepticism that Greece can meet such terms, leading to a likely default (which neither side really wants).

Indeed, Yesterday, Moody's Investors Service credit ratings agency again downgraded Greece's credit rating by three notches (Athens now has the same rating as communist Cuba.)

Greece remains mired in a recession and much of the populace is already outraged by the existing austerity program.

Greece is also essentially blocked out of the international debt m markets – investors are demanding 16-pecent=plus interest rate to invest in Greek 10-year bonds.

Meanwhile, Greece’s Prime Minister George Papandreou will officially present the government’s budget scheme in Luxembourg on Friday when he confers with Jean-Claude Juncker, the chairman of euro zone finance ministers.

The prime minister will present the main points of the mid-term plan to Juncker, which include speedier privatizations and new measures to cut government spending and raise revenues, the Greek official told Reuters.

The measures include lowering the income tax exemption, terminating other exemptions and possibly taxes on soft drinks and natural gas. From the overall picture on the talks so far, I am optimistic that we will get the fifth installment [of bailout funds].