Greek plan
February 3, 2010
The European Commission said on Wednesday it had endorsed Greek plans to cut the country's budget deficit below three percent of Gross Domestic Product (GDP) by the end of 2012 from 12.7 percent in 2009. However, the European Union's executive arm said Athens must take further steps to cut public sector wages and put finances in order.
"Greece has adopted an ambitious program to correct its fiscal imbalances and to reform its economy," EU Economic and Monetary Affairs Commissioner Joaquin Almunia said in Brussels.
However, the Commission said in a statement that "considering that Greece has failed in its duty to report reliable budgetary statistics ... the Commission is also initiating infringement proceedings."
It recommended that Greece adopt a "comprehensive structural reform package aimed at increasing the effectiveness of the public administration, stepping up pension and healthcare reform, improving labor market functioning and the effectiveness of the wage bargaining system."
In an assessment closely watched by financial markets weighing up Greece's credibility as a debtor, the Commission also said Athens must submit an interim report on its deficit reduction progress by mid-March.
It also told Athens to set aside 10 percent of current expenditure to create a contingency reserve in case of future budgetary pressures.
Late on Tuesday, Greek Prime Minister George Papandreou ordered a public salary freeze, a higher retirement age and a hike in petrol prices in a desperate bid to tame a debt crisis ahead of the EU verdict.
The Socialist leader urged political rivals to back his crisis budget as he launched a new bid to reassure the international finance community. The scope of Greece's debt and its
12.7 percent public deficit have shaken the euro and put pressure on Greek sovereign bonds.
rb/AFP/Reuters
Editor: Rob Turner