A new voting mechanism will allow EU finance ministers to impose radical new cost-cutting and tax-raising measures on near bankrupt Greece amid concerns that emergency action so far have not proven effective in preventing the fiscal meltdown.
AFP - Debt-addled Greece's euro partners have seized control of the country's budgetary sovereignty, giving Athens 30 days to slash its national spending to the bone.
The 16-nation eurozone's battle to ring-fence its shared currency amid the fallout on international money markets from Greece's unprecedented deficit crisis entered a fresh phase Monday after finance ministers met in Brussels.
Amid doubts that already stringent emergency action barely papered over the cracks, radical new cost-cutting and tax-raising measures are set to be imposed under newly-agreed European Union voting rules.
"If we observe a certain number of risks materialising, the Greek government has agreed to take additional measures" to prevent a worsening fiscal haemorrhaging, said Eurogroup chief Jean-Claude Juncker.
Finance ministers flexed their muscles by instilling qualified majority voting for a meeting on March 16, effectively cutting Athens out of the decision-making process.
Juncker, who also said that contingency bailout plans are being prepared to shore up the euro, insisted that a relentless attack on Greece by the money-men of Asia and the Anglo-Saxon world would fail.
"The financial markets are completely wrong if they think they can destroy Greece," the Luxembourg prime minister said.
Earlier, Greek Finance Minister George Papaconstantinou had warned that only an "explicit message" concerning concrete, financial help from Brussels would be enough to deter market attack dogs.
Drastic action by the Greek government has already sparked strikes and protests at home.
Nevertheless, Greece agreed to implement new proposals to hack away at its deficit and debts if EU peers remain unconvinced, within the coming month, that it can meet its 2010 target, Juncker spelled out.
Athens has committed itself to reducing a 2009 deficit running to 12.7 percent of gross domestic product by four percentage points over the course of this year -- all under the beady eyes of European Commission inspectors.
The additional measures "should focus on expenditure cuts" but also encompass "revenue-increasing measures," which could include "increasing VAT" and "establishing extra duties on luxury goods including private cars," Juncker added.
"It's up to Greece to consolidate its public finances, it's up to the euro area to stand determined," Juncker told a press conference, flanked by new economic and monetary affairs commissioner Olli Rehn.
Market analysts have been calling for numbers to be revealed to show how far the eurozone will go to rescue Greece.
But Juncker said it would be "unwise" to publicly detail "the measures we are putting in place."
Of bailout plans, which Juncker has previously said could only be coordinated bilaterally, France's Finance Minister Christine Lagarde said "several avenues can be envisaged."
Financial markets have sent the value of the euro tumbling against the dollar over recent months.
Again on Monday, the euro fell to 1.3607 dollars in late trading in London from 1.3629 dollars late in New York on Friday.
Papaconstantinou said going into the talks that "what will stop markets attacking Greece at the moment is a further, more explicit message that makes operational what was decided last Thursday" by European heads of government.
Europe vowed then to implement "determined and coordinated measures" to "safeguard financial stability."
Now is the time to "work out the mechanism," Papaconstantinou argued.
Greece's ballooning public deficit has seen its total debt shoot up to about 300 billion euros, or 113 percent of GDP, nearly double the 60 percent eurozone limit.
The eurozone has a three percent limit for deficits, although 20 of the EU's 27 nations are currently in breach of that requirement.
Moody's credit rating agency calculates that Greece must allocate 15.1 percent of all its revenues just to service its debts this year, twice the level for Spain and Portugal.
Date created : 2010-02-16