Tags: EU | Greece | bust | monitor

EU to Monitor Greece From Going Bust

Wednesday, 03 Feb 2010 09:42 AM


BRUSSELS — The European Commission on Wednesday approved Greece’s plans to stave off financial ruin, but warned that the country’s progress back from the brink would be subjected to unprecedented monitoring from Brussels.

Far-reaching cost-cutting plans are at the heart of Greece’s plans to curb a deficit of 12.7 percent of gross domestic product — more than four times the permitted ceiling for countries sharing the European Union’s single currency. That has prompted alarm in markets and weighed heavily on the euro in recent weeks.

At a news conference, Joaquin Almunia, the European Commissioner for Economic and Monetary Affairs, called the Greek government’s objectives and targets “ambitious” but “achievable.”

However, he added, “every time we observe slippages we will ask the Greek authorities to adopt additional measures.”

Late Tuesday, ahead of the European Commission’s assessment, the Greek Prime Minister, George Papandreou, had announced a series of additional austerity measures, including the extension of a public sector wage freeze across the board in 2010 and an increase in fuel taxes. He also hinted at raising the retirement age.

The government in Athens wants to reduce the deficit to 3 percent of G.D.P. by 2012.

The crisis over Greece’s wayward economic management has posed unprecedented challenges for the 16 countries in the euro zone. The euro fell to a six-month low last week — before recovering slightly — on fears that a Greek default would undermine other weak members, leading to a domino effect. The markets have been alarmed by the size of deficits in Portugal, Spain, Ireland.

“Greece is in the center of a speculative game aimed at the euro,” Mr. Papandreou said in a televised speech. “We are the weak link in the euro zone. We must act immediately and decisively.”

Mr. Almunia said he was using new powers under the E.U.’s new governing treaty to step up scrutiny of the Greek program. He announced what he described as “detailed and permanent monitoring,” with a series of regular deadlines for progress reports, the first of which will fall on March 16 and the second on May 16.

Mr. Almunia rejected suggestions that the International Monetary Fund should be called in. “I am fully convinced that the E.U. and the economic and monetary union have enough instruments to cope with the challenges to solve this problem,” he said.

He also said that the euro’s future was not under threat. “It is not the first time we have heard people saying that the euro is not going to work,” he said. “For 10 years we have been able to show that economic and monetary union is a success.”

Greece’s economic predicament is particularly toxic since not only is its deficit huge, but the country’s debt also amounts to 113 percent of gross domestic product. Though it was hit by the financial crisis, Greece had failed to get its finances in order during the previous decade, when economic growth was generally good.

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