MercoPress. South Atlantic News Agency

European Commission supports Greece drastic fiscal cuts

EC Economic and Monetary Affairs Commissioner Joaquín Almunia

The European Commission on Wednesday adopted Greece's fiscal cuts plan but placed the country under surveillance, while it decided to start procedures against Greece for failing to deliver credible fiscal statistics in the past.

The European Commission adopted a series of recommendations to ensure that Greece's budget deficit is brought below 3% of GDP by 2012 from 12.7% of GDP in 2009, that the government timely implements a reform program to restore the competitiveness of its economy and generally runs policies that take account of its long-term interest and the general interest of the euro area and of the European Union as a whole.

It is also struggling with more than £257bn of debt, an amount described by European Commission chief Jose Manuel Barroso as “excessively high”.

The Commission, in a report, said it shared the ambitious budget-deficit reduction targets that the Greek government has set itself as well as the fiscal measures and structural reforms announced in the stability programme. It also told Athens to set aside 10% of current expenditure to create a contingency reserve in case of future budgetary pressures.

The Commission also welcomed the announcement by the Greek government, on Tuesday, of a set of additional fiscal measures (concerning the wage bill, excises on fuel and pension reform), to safeguard the budgetary targets set in the programme. It called on Greece to spell out the announced fiscal measures and implementation calendar in the coming weeks and welcomed its readiness to adopt and swiftly implement additional measures if needed.

Implementation of all the measures, including the reforms to increase the competitiveness of the economy in the field of pensions, healthcare, public administration, the functioning of product markets, labour market, absorption of structural funds, supervision of the financial sector, and statistics, will be carefully monitored through regular reports to be sent to the Commission by Greece.

“Greece has adopted an ambitious programme to correct its fiscal imbalances and to reform its economy. The announcement strengthens the government's commitment to deliver the program's objectives of more sustainable public finances and a more competitive economy. This is in the interest of the Greek people, who will benefit of better and more durable growth and job opportunities in the future, and it is in the interest of the euro area and of the EU as a whole. The Commission fully supports Greece in this difficult task,” said Economic and Monetary Affairs Commissioner Joaquín Almunia.

“The Commission will monitor the execution of the budget and of the reforms very closely and regularly and welcomes the Greek government's readiness to adopt further measures as and when necessary”, he added.

The Commission's integrated recommendations will be discussed at the February Eurogroup and ECOFIN meetings.