- The Washington Times - Monday, February 15, 2010

BRUSSELS — Greece’s finance minister said a detailed rescue plan from other eurozone nations would be the best way to soothe market fears that Greece could default on debt payments.

Eurozone nations pledged last week to aid Greece “if needed to guard financial stability in the euro area,” but they did not say how they would help the country. Greece’s debt problem has shaken the entire eurozone and undermined the shared currency.

“My guess is that what will stop markets attacking Greece at the moment is a further more explicit message that makes operational what has been decided last Thursday” at a meeting of EU leaders, Finance Minister George Papaconstantinou said.

Market worries of a default have raised the cost of borrowing for the Greek government in recent months and caused the euro to slide to a near nine-month low against the dollar.

Mr. Papaconstantinou said the 16 countries that use the euro need to go beyond that to “work out a mechanism so that if necessary the mechanism will be there” for any member that cannot pay its debts.

“I think this is the logical way of addressing the issue,” he told an audience of European Union policy-makers at a European Policy Center think-tank event in Brussels.

However, Mr. Papaconstantinou said last week’s statement was a “watershed” because it showed that “in the eurozone, no one country is alone, and when it comes down to it, they stick together.”

He blamed financial markets for exaggerating Greece’s debt worries, saying Greece’s economic output is just over 2 percent of the euro area’s and a default “would not … create a problem for the euro area.”

“Any country is prey and will be prey to speculative forces,” he said. “Today it’s Greece; tomorrow it could be another country.”

Eurozone finance ministers are to meet for talks later Monday to discuss whether they think Greece’s austerity program will be enough to reduce its massive deficit over the next three years. Ministers from all 27 EU countries then will meet Tuesday.

The European Commission already has warned that it will ask Greece to do more if it can’t implement promised spending cuts and tax hikes, which have sparked protests and a sweeping public-sector strike in Greece.

The EU wants to keep Greece on a tight rein, ordering the government to report back in mid-March to show what kind of cuts it has made. The EU then could demand tougher action.

The Greek government has promised to do everything necessary to reduce its deficit from 12.7 percent of gross domestic product last year to 8.7 percent this year — and under a 3 percent limit set by EU rules by the end of 2012.

Greece’s credibility also came under fire from the European Commission on Monday, which said it wants Greece to explain by the end of February how it used complex financial deals that allegedly made its debt limits look lower.

The EU executive is seeking the power to audit the Greek public finances following a damning report from the EU statistics agency Eurostat that said Greece falsified data to hide the extent of last year’s deficit.

EU spokesman Amadeu Altafaj Tardio said the EU has given Greece an end-of-February deadline to give details on how the deals, called currency swaps, have affected government accounts since 2001.

He said such swaps weren’t illegal unless Greece was not using market rates to calculate the exchange rates used for the swaps. Greece never told the EU that it was using the swaps to mask debt, he said.

Mr. Papaconstantinou said some of the derivative contracts used in the past “were at the time legal and Greece was not the only country” using them. He said they have now “been made illegal and Greece has not used them since.”

He said the government now does not want to use financing that is not approved by Eurostat.

“We do want to restore credibility,” he said. “We have enough trouble as it is convincing people that our numbers are real.”

Greek Finance Ministry officials, speaking on condition of anonymity, told the Associated Press on Sunday that the government has met with most major international banks over the past months “to explore options and discuss their involvement in financing Greek national debt.”

They said any debt-financing proposals would be conducted transparently and in line with rules on government debt set by Eurostat.

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