Prime minister vows to "clean up" battered Greek economy

All-party crisis meetings were called for Greece by Greek Prime Minister George Papandreou after ratings agencies downgraded the country's government debt bonds and 10% was wiped off the national stocks markets.

AFP - Greek Prime Minister George Papandreou (pictured) on Thursday called an all-party crisis meeting aiming to reassure jittery markets that Greece is willing to "clean up" its economy.

Papanderou acted as Greece came under further pressure from anxious stock exchanges and the European Union. The European Central Bank called for "courageous steps" to tackle the economy after a series of downgrades of Greek debt amid growing concerns that the country is heading toward bankruptcy.

"This is about coming together in the fight against corruption and in favour of transparency, of the proper functioning of the state with a just fiscal system that each Greek citizen will respect and will strike at fiscal evasion and fraud," Papandreou said.

The meeting, set for next week, is aimed at "sending a powerful message abroad showing that we're determined to move forward, to clean up our economy and ... give hope to every Greek citizen."

The government is seeking to reassure financial markets and investors who lend money to Greece that new budget proposals to cut spending will be produced within six to seven weeks.

Greek stocks picked up slightly on Thursday after shedding almost 10 percent of their value over two days following ratings agency downgrades of government debt bonds. There are growing fears the crisis could affect other eurozone members.

Papandreou said on Wednesday that he would do "whatever is necessary to check the huge deficit, to restore stability in public finances, to promote development."

The government's credibility has been damaged by the revelation that the public deficit is expected to surge to 12.7 percent of output this year and that debt that amounts to 113 percent of gross domestic product.

ECBank President Jean-Claude Trichet urged the Greek government to take "courageous" measures to tackle its debt crisis since it concerns all countries which use the euro currency, the eurozone.

"Consider the gravity of the situation. I am confident that the Greek government will in the near future take the courageous and necessary measures required," he told the Belgian economic dailies L'Echo and De Tijd.

Many analysts have warned that the crisis in Greece exposes great strains within the eurozone, and also the challenges many European governments that will have to reduce budget deficits in time to satisfy markets without strangling economic recovery.

Jean-Claude Juncker, president of the eurogroup which unites the 16 countries in the eurozone, said the budget situation in Greece was "tense" but he "totally excluded" a state bankruptcy.

Greece's sovereign debt was downgraded on Tuesday by the international ratings agency Fitch, prompting financial market jitters amid a collapse in confidence in the Greek economy.

Internal eurozone worries are now beginning to extend to Ireland and Spain, which have each received warnings from the ratings agencies. Standard and Poor's has also since cast doubts over Portugal's prospects.

The affair has put significant downward pressure on the euro on international foreign exchange markets.

Finance Minister Georgios Papaconstantinou told French newspaper Le Figaro newspaper that the Fitch downgrade had "hurt" but blamed the problems on the previous government.

Fitch "didn't take into account what the new government is doing. (Our budget) provides for a cut in public sector spending. What worries the agency (Fitch) is the medium term.

"You mustn't forget we've only been in office 50 days," Papaconstantinou told the French daily.

Gilles Moec, senior economist at Deutsche Bank, said of Greece's sovereign debt ratings that "there are still quite a few notches to go before it becomes a natural issue for refinancing at the European Central Bank."

Date created : 2009-12-10