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Britain unveils plan to cut national deficit

Britain joined the rest of Europe on Tuesday by announcing a five-year deficit reduction plan worth billions of dollars, despite pleas from President Obama last week for G-20 countries to pace fiscal tightening.

Britain's decision follows a wave of austerity packages across Europe, including almost $100 billion worth of cuts in Germany and public-sector pension reforms in France.

In a letter to members of the G-20 group Friday, Obama urged them to avoid "consequential mistakes of the past when stimulus was too quickly withdrawn."

Nevertheless, Britain's new Conservative-Liberal Democrat coalition went ahead Tuesday with a package of spending cuts and tax increases that will be worth $188 billion a year by 2014-15.

George Osborne, Britain's finance minister, said that of those savings, about $145 billion will come from cuts in spending and almost $43 billion will come from tax hikes.

The ax will fall on various social welfare benefits, including a controversial three-year freeze on child benefits, a cap on housing benefits and means testing for disability allowances.

Osborne also announced a two-year freeze on public-sector salaries above about $31,000 a year. The pain for public servants is expected to worsen after a planned review of pensions in September. Most public sector departments face an average 25 percent reduction in their spending budgets over the next five years.

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