Greece must make more cuts

 

Greece must tighten its belt further to reach this year's deficit-cutting target, but it is not yet clear by how much, the European Commission said.

Economic and Monetary Affairs Commissioner Olli Rehn on Monday discussed with Greek authorities the need for deficit-cutting measures on top of those already taken by Athens.

No bailout plans were discussed, but "both parties understand ... there is a need for additional measures and these should be presented as soon as possible... in order to make sure that the target of 4 percent is reached" Commission spokesman Amadeu Altafaj said on Tuesday.

Greece has committed to cutting its budget deficit to 8.7 percent of gross domestic product this year from 12.7 percent in 2009 and to bring the deficit to below the European Union ceiling of 3 percent in 2012.

Altafaj said he "cannot quantify" how far short of the 4 percent target the measures already announced have left Greece.

The size of the gap was still under discussion between Greek and EU experts and "at this point we are waiting for the new measures to be presented."

The ambitious austerity programme hopes to calm debt markets that have been demanding increasingly high premiums for lending money to Greece amid concerns that Athens might at some point not be able to service its debt, which stands at more than 120 percent of GDP.

Market concerns persuaded euro zone countries to issue a statement on February 11 declaring that, if the need arose, they would move to safeguard the financial stability of the 16-country euro zone. 

But they gave no details of a potential rescue plan and instead put more pressure on Athens to deliver on its austerity plan.

Monday's discussions with Rehn "were about efforts to correct the fiscal situation in Greece. We did not enter (or) elaborate on scenarios of bailouts and things like that" Altafaj said.

The Commission was pleased to see the Greek government was determined to do what was necessary to reach the 4 percent target, he added.