- The Washington Times - Tuesday, February 16, 2010

BRUSSELS — European finance ministers are getting tough with Greece, giving the government just a month to show it is making drastic budget cuts in a bid to calm markets and stop Athens’ debt crisis from spreading to other countries.

The EU’s top economic official also said he would probe Greece’s use of complex finance deals to mask debt in previous years.

Ministers from the 27-nation block said in a statement that Greece must show by March 16 that it is on track to cut its deficit by a hefty 4 percent of gross domestic product — from a staggering 12.7 percent of gross domestic product to 8.7 percent this year, and that it will bring it under a 3 percent limit by 2012.

Even as workers from his ministry joined a strike against the cuts back in Athens, Greek Finance Minister George Papaconstantinou told reporters in Brussels that the country is already ahead of its deficit reduction goals. He said it even ran a January surplus thanks to a one-off tax on large companies.

“The execution of the Greek budget … is going quite well,” he said.

European national leaders pledged last week to help Greece “if needed to safeguard the financial stability of the euro area as a whole” but did not say how any bailout would work. Wednesday’s statement from the finance ministers did not offer any detail either.

The Greek government says it isn’t asking for a bailout and won’t need one.

EU Economy Commissioner Olli Rehn said the European Union “can help Greece to overcome these difficult times, provided that Greece is prepared to help itself with difficult actions.”

Eurozone finance ministers said Monday that they want the Greek government to ready new spending cuts, increase sales and energy taxes, and impose new levies on luxury goods, including cars, if it cannot by mid-March show that it is making hefty deficit reductions.

Greece has promised it will take such extra measures if it has to in order to restore its credibility, shattered by news that it falsified statistics to make its deficit look smaller last year and that it used complex financial deals to massage figures dating back to 2001.

Mr. Rehn said he had told Greece “to provide information on market currency swaps and … their impact on debt and deficit figures” by Friday.

“It is clear that a profound investigation must be done on this matter, and I ensure that we conduct such an inquiry to see whether all the rules were respected,” he said.

The Greek government, which also is promising to reform pensions and health care, is facing opposition at home to its current plan to freeze public sector pay, with Greek customs officials walking off the job Tuesday for a three-day strike, which will hamper imports and exports.

Traders’ fears that Greece might not make debt repayments increased Tuesday, with the spread of the Greek government bond widening to 3.35 percentage points against the benchmark German bond. The spread was below 3.00 points last week on hope of a detailed eurozone bailout plan.

Associated Press writers Emma Vandore in Brussels contributed to this story.

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