Greece must follow Ireland to solve fiscal woes -- Cowen
Taoiseach says Athens will have to impose same type of cuts as us, as IMF asked to oversee plan
Published 12/02/2010 | 05:00
TAOISEACH Brian Cowen said last night the Greek government would have to make the same types of cuts as his government had to impose to get out of the economic crisis.
EU leaders yesterday promised to shore up Greece's finances if necessary -- but stopped short of any specific offer of a bailout.
The details of the package won't be finalised until early next week at a meeting of EU finance ministers.
EU leaders suggested it could include some form of loans to Greece to help it service its debt and avoid a damaging default on its loans. Greece has to borrow €20bn in April and May to replace loans which are due for repayment.
Its total requirement to cover replacements and the budget deficit will be more than €50bn in 2010.
In a significant change in policy, eurozone governments agreed that the International Monetary Fund (IMF) would be involved in a consultative capacity to work with Greece. But it will not be asked to provide loans.
The Greeks were told they would have to reduce their budget deficit by 4pc this year and the IMF will assist their efforts and monitor the results.
Mr Cowen pointed out that the Government had effectively reduced the deficit in this country by 2.5pc through the spending cuts introduced in December's Budget.
"In our case it was 2.5pc. In the Greek case, it is 4pc, because their deficit is higher," he said.
The big unanswered question is what happens if the Greeks do not meet the stringent requirements. A general strike called for later this month is expected to have widespread support.
"Markets will only normalise once they outline more detailed measures," said Andreas Rees, an economist at UniCredit in Munich. "The statement won't be enough to reassure investors. It's breathing space."
Mr Cowen said the plan for Greece was along the same lines as that applied in Ireland to reduce the budget deficit and get it back in line with eurozone rules, which limit borrowing to 3pc of GDP.
The Greek deficit is put at close to 13pc of GDP this year, and may be higher. Ireland's planned deficit is almost 12pc of GDP, but total Greek debt is almost twice that of Ireland's as a share of GDP.
"It is the same process. It is an excessive deficit procedure. The same as we had to take," Mr Cowen said.
The Taoiseach said the Irish Government still had issues to deal with, but the measures taken to date had generated a positive response on the international markets. The Government had to continue along that path "to provide confidence", he said.
"All of that is about strengthening the view of Ireland, both out there and back home, that we are determined to gain control of our own affairs. That's what we want to do," he added.