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Finance minister says Athens ready to make 'drastic' cuts to deficit


Latest update : 2010-04-26

The Greek finance minister, George Papaconstantinou, said Monday that Athens was ready to "drastically" cut its deficit after talks with the European Union and the International Monetary Fund on an emergency loan to tackle spiralling public debt.

AFP - Greece on Monday said it would make fresh deficit cuts following emergency loan talks with the EU and the IMF as investor fears of a default spiked and European leaders struggled to show solidarity.

Greek Finance Minister George Papaconstantinou said Athens shared the EU-IMF approach and would announce "specific measures and policies" to limit rampant public deficit and debt "as soon as the procedure is completed.

"Our shared approach is simple, that Greece must drastically cut its deficits in coming years, check its debt and make all structural adjustments to render the Greek economy more competitive," the minister said in a statement.

He added that the proposals of the International Monetary Fund -- whose involvement has raised hackles in Athens -- are "not particularly different" to those of the European Union and the European Central Bank.

Greece is scrambling to get an EU-IMF financial package worth 45 billion euros (60 billion dollars) in place following months of debt crisis and ahead of a May 19 deadline to pay bondholders about 8.5 billion euros.

It has set itself the unprecedented task of slashing its public deficit to 8.7 percent of output this year by reining in spending and boosting tax income. The European Commission last week estimated the deficit at 13.6 percent.

Athens is also labouring to reduce its public debt from its current level of nearly 300 billion euros but its efforts have been badly undermined by steeply rising borrowing costs as investors fear a default is looming.

The rate at which Greece would have to borrow new 10-year funds on the market on Monday climbed to 9.385 percent, while the rate for two-year loans rose above 12.85 percent, indicating concern over a possible default.

European leaders hastened to show a determined face on Greece's debt rescue after a rift appeared to open between Germany and Italy earlier in the day.

French President Nicolas Sarkozy and European Commission chairman Jose Manuel Barroso called for action against speculators, while German Chancellor Angela Merkel said expelling Greece from the eurozone was "not an option".

"What we need is a quick reaction for the stability of the eurozone," she said.

Merkel's government ally, Foreign Minister Guido Westerwelle had earlier rattled his sabre by noting that Berlin would oppose financial aid to Greece unless Athens first presented a credible debt reduction program.

"Making promises of concrete aid too soon will only have the effect of taking the pressure off Greece," Westerwelle said.

"Above all, we need to see budget consolidation taking place in Greece," said Westerwelle, whose governing coalition is facing a tricky regional election on May 9.

Westerwelle's comments drew an attack from his Italian counterpart as he arrived in talks in Luxembourg for a foreign ministers' meeting and the EU's hard-fought unity on the Greek crisis suddenly looked set to unravel.

"I am concerned by the intransigence Germany is showing," Frattini said.

"This is not a rescue operation (of Greece), this is a consolidation of Europe's walls, the walls of the euro, it's a rescue for all of us," he said.

Meanwhile French Finance Minister Christine Lagarde, speaking at a conference in New York, said: "Time is of the essence, but we all need to accommodate processes of the rule of law and of democracy."

Greece also had unforeseen domestic concerns to deal with as its airforce pilots refused to fly non-emergency missions for "psychological" reasons to protest against pay cuts in state spending including the military.

And the government stood accused of handing the country over to the IMF under a complex loan rescue mechanism that failed to offer quick relief.

"(Greek PM) George Papandreou pushed the button of a mechanism that is not operational," wrote Dimitris Mitropoulos, a columnist in top-selling Ta Nea daily which nominally supports the government.

"The wiring has not been connected and most importantly, the voltage needed has not been set," he added, noting that Greece's actual loan needs could run to 150 billion euros over three years according to some estimates.

The potential involvement of the International Monetary Fund has met a poor response amid fears that it could prescribe austerity cuts that will further undermine the country's recession-hit economy.

Conservative opposition leader Antonis Samaras accused the government of placing the country under "suffocating" IMF control while the leading union spoke of a "particularly painful" development which called for mobilisation.

Greek unions have already staged a series of general strikes, work stoppages and street protests against the government's crisis cutbacks.

Greek-flagged ships were blocked at the main port of Piraeus on Monday under a sailors' strike against government efforts to open the sector to foreign competition. The capital will be left without public transport on Tuesday during a six-hour work stoppage against state spending cuts.

Greece has ruled out the prospect of restructuring its debt or leaving the eurozone.


Date created : 2010-04-26


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