Saturday 10 December 2016

Greece told to step up budget cuts

Published 16/02/2010 | 11:51

ECB president Jean Claude Trichet and ECB vice president Luca Papademos talk prior to an Economic and Financial Affairs (ECOFIN) ministers meeting at the EU headquarters in Brussels. Photo: Getty Images
ECB president Jean Claude Trichet and ECB vice president Luca Papademos talk prior to an Economic and Financial Affairs (ECOFIN) ministers meeting at the EU headquarters in Brussels. Photo: Getty Images

European Union finance ministers are to warn Greece that it will have to step up harsh budget cuts if it can't prove by March 16 that an existing programme of cuts will shrink its massive deficit this year.

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Greece has promised to reduce its budget gap from 12.7pc of gross domestic product to 8.7pc, seeking to calm market worries that it could default on its debt and require a bailout from the 16 countries that use the euro.

Eurozone leaders pledged last week to help Greece "if needed to safeguard the financial stability of the euro area as a whole", but did not say how any bailout would work.

On Monday, they asked Greece to ready new spending cuts, increase sales and energy taxes and impose new levies on luxury goods, including cars - and the wider EU is expected to back that call on Tuesday.

The Greek government, which is also promising to reform pensions and health care, is facing opposition at home to its current programme of cuts - including a public sector pay freeze.

Meanwhile, Greek customs officials walked off the job on Tuesday for a three-day strike which will hamper imports and exports.

Spanish Finance Minister Elena Salgado, who is leading the talks between all 27 nations on Tuesday, said she was "fully confident" that Greece would take any action that other EU countries ask of it.

"In one month from now the European Commission will evaluate the situation again and we will see if it is necessary for Greece to take more measures," she told reporters on her way into the meeting.

Sweden's Anders Borg said the crisis "is quite an urgent situation for Europe" and the onus is on Greece to make "more concrete steps... to regain credibility."

He would not rule out help from EU nations outside the eurozone, saying "this is a matter for the whole of Europe and we should not rule out a support effort."

Borg also called for a strong role for the International Monetary Fund in monitoring Greek moves to cut public spending and hike taxes.

However, Luxembourg Prime Minister Jean-Claude Juncker, who heads economy talks between eurozone nations said any IMF involvement would be limited.

"The IMF will not design the Greek budgetary planning," he told reporters. "The IMF can send technical experts to Greece because the European commission doesn't have the human resources to deal probably with the job. But it's not a matter of having the IMF design the exit strategy."

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