Tags: eu | officials | greece | fix

Europe to Greece: Fix Own Economy, Don't Expect Help

Friday, 11 Dec 2009 08:19 AM

European Union officials were reluctant Thursday to promise help to debt-saddled Greece, saying it was up to Athens to put its economy back on track.

Swedish Prime Minister Fredrik Reinfeldt, whose country holds the rotating EU presidency, said Greece's trouble was "basically a domestic problem and has to be addressed by domestic decisions."

He spoke before leading talks between European Union leaders at a Thursday summit in Brussels.

Greece's government debt was downgraded to the worst of the 16 nations that use the euro by Fitch Ratings on Tuesday, over worries that the country was not tackling a ballooning budget deficit.

EU Commission President Jose Manuel Barroso said Greece faces "very substantial fiscal and economic challenges" and that it must take more measures to meet them. He said EU officials would watch the situation closely and was ready to help the government draw up a comprehensive plan for its economy.

German Chancellor Angela Merkel said the 16 euro nations were limited in what they could do to get one of them to stick to the strict EU debt and deficit limits that stabilize their shared currency.

Luxembourg Premier Jean-Claude Juncker — who heads a group of euro-zone finance ministers — said he saw no chance of Greece going bankrupt as some investors and analysts have warned.

Greek Prime Minister George Papandreou says he's ready to make major changes — which may mean more tax hikes and heavy cuts to public spending on social welfare and health care.

"The new Greek government is very well aware of its responsibilities to revamp the Greek economy, to modernize the public sector, to fight chronic problems such as corruption and clientelism, to make sure that we have a sound, viable economy," he told reporters in Brussels.

Greece has allowed its budget deficit to swell to 12.7 percent of economic output this year — four times the European Union limit of 3 percent. The government admits debt is also at the highest level in modern Greek history — at some euro300 billion ($442 billion).

Papandreou urged opposition leaders to hold rare joint talks on the economy to help address what he said was "a crucial phase" for the country. Left-wing opposition parties have indicated they will fight any austerity measures.

Merkel noted, "The question arises of what authority Europe actually has to give national parliaments any task."

Finnish Prime Minister Matti Vanhanen was far blunter, saying the "the EU cannot help Greece, it is part of the rule ... (that) encourages member states to take care of their own finances."

Belgian Finance Minister Didier Reynders said some kind of EU aid was possible as a last resort but it was preferable for the country to take action itself.

"That was always possible," he said. "We will obviously try to come out of this without any manifest repercussions on the currency we share."

EU officials have hinted that they have a plan to bail out a eurozone nation that risks going bankrupt — but have refused to give details.

In practice, the European Central Bank has buoyed weaker economies by offering unlimited liquidity to banks, such as those in Ireland. Irish Finance Minister Brian Lenihan said this sort of help had warded off a possible economic collapse last year.

EU finance ministers told Greece last week to draw up a new debt reduction plan in January so they can discuss setting a deadline for bringing the deficit under 3 percent.

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European Union officials were reluctant Thursday to promise help to debt-saddled Greece, saying it was up to Athens to put its economy back on track.Swedish Prime Minister Fredrik Reinfeldt, whose country holds the rotating EU presidency, said Greece's trouble was...
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2009-19-11
Friday, 11 Dec 2009 08:19 AM
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