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EU urges Greece to act on debt

Source: Reuters - Tue 19th Jan 2010

Spain's finance minister played down the risk of a Greek debt default on Tuesday but European Union ministers kept pressure on Athens to repair its public finances and what one called fraudulent statistics.

With financial markets fretting about its ability to service one of Europe's biggest sovereign debts, Greece tried to reassure the other 26 EU states after a charm offensive on Monday with ministers from the countries that use the euro.

Asked about the possibility of a Greek default, Spanish Economy Minister Elena Salgado, whose country holds the EU presidency for the first half of this year, said: "We're not worried at all."

"I think Greece is going to do all that is necessary so we're not worried about that" she said before a regular meeting of the 27 EU finance ministers in Brussels.

Several ministers took a tough line on Greece, whose finance minister, George Papaconstantinou, told reporters his government's recently conceived deficit-reduction plans had drawn a positive initial response from other ministers.

"The situation with Greek statistics has been basically fraudulent" Swedish Finance Minister Anders Borg said.

Finnish Finance Minister Jyrki Katainen said what counted now was delivery rather than promises to fix Greece's deficit.

"We need to assess whether the measures are real. We need statistics we could trust and real measures on how to consolidate the budget" he said. "No one but Greece can help itself. There is no way to expect any outside help."

CALLS FOR RELIABLE STATISTICS

Greece's ballooning budget deficit and debt of more than 120 percent of GDP have triggered downgrades by debt rating agencies and market speculation about whether Athens can service its obligations or might even have to quit the 16-country euro zone.

Greece says it plans to reduce its budget deficit this year to 8.7 percent of gross domestic product from a 2009 figure of 12.7 percent. A longer-term stability plan aims to bring the shortfall to 2.8 percent in 2012, below the 3 percent limit of the European Union's Stability and Growth Pact.

The ministers arriving for Tuesday's talks highlighted the need for Athens to act and to provide reliable statistics.

Greek data for 2008 was revised to a deficit of 7.7 percent of GDP, from 5.0 percent initially. The Socialist government that took power in October also announced a forecast of 12.7 percent for 2009, twice the level the preceding government had spoken of and three times as big as earlier official targets.

"We presented yesterday a very serious and credible programme of fiscal consolidation. First reactions have been positive and we're now moving to implementation" Papaconstantinou said.

Austrian Finance Minister Josef Proell, asked whether there might be a need to resort to financial sanctions that are provided for under the EU's stability pact on deficit control, said now was not the time to consider such steps.

"I don't think we should be thinking about punishment. I think we should most of all be thinking about motivation and setting clear objectives to set and implement reforms and the new government seems ready to do this" he said.

"We will obviously observe and accompany them in this. Obviously Greece is going to be observed particularly closely by colleagues. This is a situation that is obviously a test where they have to prove themselves but it can absolutely be passed."

The EU stability pact rules ultimately allow for fines of a maximum of 0.5 percent of GDP to be imposed on countries that fall out of line but the situation has never gone that far.

Asked by reporters whether such a step could be taken on Greece, German Finance Minister Wolfgang Schaeuble said on Monday in Brussels: "It's all in the EU treaties."

A more in-depth discussion of Greece's deficit reduction plans is scheduled for February at a next meeting of euro zone and EU finance ministers.

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