Alarm bells ring over 'inadequate'Greek cuts
Fears that an economic austerity programme announced by Greece is not tough enough to make the dramatic cuts necessary to rein in its massive budget deficit are set to complicate talks on a possible rescue plan for the country by European finance ministers tonight.
The Greek government has introduced a series of measures, including a public sector pay freeze and higher tax on petrol and alcohol, to bring down its deficit from 12.7 per cent to 8.7 per cent this year amid a growing crisis for the euro.
However, senior figures at the EU Commission believe that the plans announced so far could leave Greece short by as much as 1.25 of the 4 percentage-point cut required by the end of 2010.
The euro dipped to a nearly nine-month low at dollars 1.3533 against the dollar on Friday as markets reacted to an EU summit declaration of support to Greece that failed to give any details of how it could be rescued from collapse, with Germany objecting strongly to being tied to a bailout by its taxpayers.
"It seems that when the Greeks announced all their measures, they did not add up to 4pc," an EU official said. "There does seem to be a gap of 1.25pc between what was asked for and what was announced."
Another source involved in the discussions said: "It is difficult to evaluate the budgetary impact of these measures in a situation where we still do not know what the deficit was for last year."
Ministers from the 16 nations that use the euro will gather tonight to consider the plight of Athens.
Prime Minister George Papandreou announced extra measures including a public sector pay freeze earlier this month, which helped to secure European Commission support for Greece's three-year plan to cut its deficit to 2.8 per cent by 2012. Finance ministers from the EU will consider the plan tomorrow.
Mr Papandreou is already furious at what he believes is a lack of real EU support for his country, saying Greece is being used as a 'guinea pig'.
There were further damaging disclosures over the weekend about how Greece had hidden the true size of its debt in order to meet the criteria for the euro in 2001.
In one deal, the government received cash in exchange for mortgaging airport landing fees to a bank. A similar deal in 2000 handed over vast sums in future lottery ticket revenue for money up front. The Greek government kept the transactions off the balance sheet by classifying them as sales rather than loans.©The Times London)