Greece has only days to explain its use of complex financial deals that it used to mask debt and just a month to prove that its drastic budget cuts go far enough to reassure markets — and other EU governments reluctant to bail Athens out if it can't pay its bills.
The Greek crisis has plunged the 16 nations that use the euro into a crisis by breaking rules on debt and deficit that underpin Europe's currency union amid worries that its problems could be even bigger because its public finance figures cannot be trusted.
The EU's top economy official, Olli Rehn, said Tuesday that he wanted the Greek government to supply answers by Friday on how it used currency swaps and how that affected debt and deficit figures.
European Union finance ministers on Tuesday also gave Greece a deadline of March 16 to show that it can make big spending cuts to bring its deficit down from the EU's highest, 12.7 percent, to 8.7 percent this year.
They said in a statement that this was essential to "remove the risk of jeopardizing the proper functioning of economic and monetary union."
Euro zone nations — who have pledged to provide a financial bailout to Greece if needed — said they would demand new spending cuts, higher value-added taxes and fuel taxes and new taxes on luxury goods, including cars, if Greece can't make the deficit reductions it is promising.
Greece now has a month to show that it can make real savings from a freeze on public sector salaries, cuts to bonuses and stipends and promises to reform pensions and healthcare.
The government is facing opposition at home.
Greek customs officials walked off the job Tuesday for a three-day strike which will hamper imports and exports.
But Greek Finance Minister George Papaconstantinou insisted that he is already ahead of schedule on swinging budget reductions and that public finances reported a slight surplus last month thanks to a one-off tax on large companies.
"It's a matter of credibility for the country," he told reporters.
"The execution of the Greek budget for the month of January, based on preliminary figures, is going quite well. We have actually a surplus."
Greece says it isn't asking for financial help and won't need any — but it is facing a credibility crisis as a Feb. 1 report commissioned by the Greek finance ministry warns of "significant debt revisions" for 2009 statistics due to swaps, debt to suppliers and state-guaranteed loans that may default.
The report said some swaps are now "being done in order to transfer interest from the current year to the future, with long-term loss to the Greek state."
Rehn said "it is clear that a profound investigation must be done on this matter," promising that he would check to see if all rules were respected.
"If it turns out that there is such kind of securitization of swaps that are not in line with the rules of the time, then of course we would need to take action," he said.
The EU can take Greece to court, under threat of daily fines, to change its statistics methods.
It is already threatening legal action for Greece's failure to report accurate public finance figures last year.
Papaconstantinou said Monday that such swaps were legal when Greece used them and that it is not using them now and will stick to EU statistics rules on new financing deals.
Papaconstantinou also said Greece was not alone among EU nations in using such deals.
Rehn said he was not aware of similar problems with other countries but that "this has still to be verified."
Rehn also took a shot at the investment banks that advised Greece to mask debt.
Reports in The New York Times and Germany's Der Spiegel said that Greece used U.S. financial institution Goldman Sachs to engage in the swaps.
The bank did not comment when contacted last week.
"I think the banks themselves should also ask, not least after the financial crisis, if this has been in line with the code of ethics," he said.
Traders' fears that Greece might not make debt repayments increased Tuesday, with the spread of the Greek government bond widening to 3.35 percentage points against the benchmark German bond.
The spread was below 3.00 points last week on hope of a detailed euro zone bailout plan.
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