The European Commission today gave its backing to budget-cutting measures that Greece hopes will bring its deficit under control by 2012.
Joaquín Almunia, the European commissioner for economic and monetary affairs, said that efforts to cut Greece’s ballooning deficit were “absolutely urgent”.
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Almunia said the Commission felt that a Greek government plan to get its budget deficit below 3% of gross domestic product (GDP) by 2012 “is achievable”.
Greece estimates its 2009 deficit at 12.7% of GDP, the largest in the eurozone. The EU’s stability and growth pact requires members of the euro currency zone to keep their deficit below 3 %.
Almunia rejected calls for a bail-out from the EU or the International Monetary Fund, adding that the EU “had instruments enough” to deal with the crisis in Greece.
Almunia warned, however, that the EU would hold Greece to stringent and permanent new monitoring rules to ensure it stayed on course to meet the target.
“The Commission will monitor the execution of the budget and of the reforms very closely and regularly,” Almunia said. He said he hoped other EU governments would back the monitoring plans and support Greece’s plan at the next meetings of finance ministers from the 16-member eurozone and 27-member EU on 15-16 February.
Almunia warned Greece that the EU would step in and recommend changes to economic and budget reforms if the targets started to slip.
The Commission warned that it would not allow the Greek budget crisis to threaten the stability of the euro or the economies of its members.
Under the proposed monitoring plan, Greece will have to report progress by a 16 March deadline on how it will implement measures to achieve cuts this year, and possible additional measures it will have to take. Almunia said follow-up reviews of the progress of reforms would be set in April and in May. Quarterly reports are expected after that.
The slew of austerity measures announced by Greek Prime Minister George Papandreou includes tax hikes, a cut in public-sector wages, a hiring freeze and reforms to pensions.
The Commission also announced that it has started infringement procedures against Athens over the way it collects its economic data. The Commission said Greece “failed in its duty to report reliable budgetary statistics”. It called on Greek authorities to “take all necessary steps” to fix the way statistics are gathered and reported to the EU.
Almunia called on Greece to adopt legislation by 15 May to publish budgetary reports on a monthly basis.
The Commission is also proposing that Eurostat, the EU’s statistical office, be given powers to audit member states’ public finances.
The Greek government was forced to revise its deficit projections upwards in October, a move that received heavy criticism from the EU over the quality of the country’s economic data.