Hammered by markets over ballooning deficits and debt, Greece has pledged to cut its double-digit budget gap to below the EU's 3% of GDP limit by 2012 and EU officials are on a three-day visit to Athens to inspect the plan.
"They asked us to quantify the results of the measures and to include this in the stability plan," said a senior government official speaking on condition of anonymity.
Meanwhile, the Spanish EU Presidency said today (7 January) that there were "limits" to the amount of support Greece can expect from the European Union in its fight to contain its ballooning budget deficit.
Diego López Garrido, Spain's Europe minister, said that the EU treaty contains a "no bailout" rule, which gives national governments the responsibility for managing their own budgets. Members of the euro bloc benefit from the euro zone's image of stability, but "they have to address their problems," he added.
Greek officials said the EU team was particularly interested in Greece's twin deficits - budget and current account - and also asked for a more specific timetable of when the measures would start to pay off.
Unconvinced by the government's broadly outlined policies, investors and rating agencies have long asked for more details about Greece's deficit-cutting policies.
Rating agencies have warned they may cut Greece's rating further if they are not satisfied with the measures and their implementation.
Greek markets were hit at the end of 2009 by concerns about the country's fiscal deterioration after the new socialist government revealed the budget deficit would reach 12.7% of GDP in 2009, more than twice previous forecasts.
Greece is also set to become the EU's most indebted country this year, with debt rising to 124.9% of GDP according to EU data.
The Greek government has already announced a series of measures, including a 10% cut in supplemental public sector wages, and a 10% reduction in social security expenditure this year.
Officials ruled out on a VAT tax hike. Unions have warned they will strike early next month if the measures eventually taken hurt incomes and benefits further. "Many critical points remain unclear but we estimate that from the cut of supplemental allowances we will have a reduction of 3-4% in public sector salaries," said Spyros Papaspyros, president of the ADEDY public sector umbrella union.
In a sign of increasing pressure on Greece to get its finances back in order, European Central Bank executive board member Juergen Stark warned on Wednesday (6 January) that the EU would not save Greece if its debt problem worsened. But analysts said Stark's comments did not necessarily mean the EU would refuse to assist Greece if aid became necessary to prevent a debt default.
(EurActiv with Reuters)
