Lenihan offers advice to Greeks on cutting deficit
Former ECB economist urges caution on ‘bailout’
FINANCE Minister Brian Lenihan is ready to give advice to his Greek counterpart on how to cut ballooning government debt, he said yesterday.
Mr Lenihan said he and his eurozone counterparts were to have a “full and frank discussion” about what kind of rescue package could await Greece at last night’s preliminary meeting of the ‘Eurogroup’ of ministers from the 16 euro states.
The new EU Economic and Monetary Affairs Commissioner said Brussels expected Greece to bring forward new plans to cut its budget deficit, the largest in the euro area.
“We expect that in due course the Greek government will take the necessary additional measures,” Olli Rehn said. Greek finance minister George Papaconstantinou said his task was like changing “the course of the Titanic”.
His government wants clarification of last week's EU summit message, which promised “determined and co-ordinated action” should the euro run into trouble because Athens could not raise the loans it needs.
It is still unclear if ministers will give Greece the assurances it wants. Interest rates on twoyear Greek government loans rose to 5.230pc yesterday, compared with 5.1547pc on Friday as markets worried about the uncertainty and disagreements in Germany.
“The heads of government made the position clear last week,” said Mr Lenihan. “It's obvious we'll be building on their work. We'll have what I'm sure is called a full and frank discussion on all the matters.”
In January, the government in Athens pledged to slash its deficit by four percentage points of GDP this year through a package of public-sector wage cuts and a hiring freeze, as well as a series of one-off alcohol, tobacco and property taxes.
Taoiseach Brian Cowen has already pointed out that this is almost twice the reduction achieved by Ireland this year. Speaking at a briefing yesterday, Mr Papaconstantinou said: “People think we're in a terrible mess – and we are.”
Otmar Issing, former chief economist of the European Central Bank, wrote in the Financial Times that “financial aid from other EU countries or institutions which amounted, directly or indirectly, to a bailout would violate EU treaties and undermine the foundations” of the euro.
“Once Greece was helped, the dam would be broken,” added Mr Issing. An Irish government spokesman said the fact that Irish bond spreads had remained steady indicated “that we are already some way down the path” of addressing the worst of the crisis here.
The spokesman said Mr Lenihan met with three new EU commissioners: Ireland's nominee, research chief Maire Geoghegan-Quinn; economics supremo Olli Rehn; and the competition chief, Joaquín Almunia.