MercoPress. South Atlantic News Agency

Greek exit from Euro zone becomes an option; Portugal faces two-year recession

Jean-Claude Juncker, head of the group of Euro zone finance ministers described the version as “stupid” (Photo AP)

Top finance officials of the Euro zone's biggest economies met to discuss Greece's debt crisis and Athens denied a media report that it was considering whether to leave the block.

Jean-Claude Juncker, head of the group of Euro zone finance ministers, said the meeting in Luxembourg was attended by ministers from Germany, France, Italy and Spain. He said there was a broad discussion of Greece and other international economic issues.

Juncker denied a report in Germany's Spiegel Online magazine that the talks were held to discuss the possibility, raised by Athens, of Greece withdrawing from the 17-member Euro zone, as well as the idea of restructuring Greece's 327 billion Euro (470 billion US dollars) sovereign debt.

“We have not been discussing the exit of Greece from the Euro area. This is a stupid idea. It is in no way -- it is an avenue we would never take,” he told reporters.

“We don't want to have the Euro area exploding without reason. We were excluding the restructuring option, which is discussed heavily in certain quarters of the financial markets...”

But Juncker said a meeting of all Euro zone finance ministers on May 16 would discuss whether Greece needed a further economic plan, beyond the 110 billion Euro bailout which it obtained from the European Union and the International Monetary Fund in May last year. He did not elaborate.

Greek Finance Minister George Papaconstantinou attended the Luxembourg talks, his Ministry said. It added that Greece remained committed to repairing its finances and returning to economic growth.

”The minister was invited to exchange views (on issues including) economic developments in Greece,“ the ministry said. ”It is clear that during this meeting it was never discussed or posed as an issue whether Greece would remain in the Euro zone.“

The Luxembourg talks were also attended by European Central Bank President Jean-Claude Trichet and Olli Rehn, the European commissioner for economic and monetary affairs, Juncker said.

Meanwhile another EU sick man Portugal is expected to sink into recession this year and next due to the terms of its 78bn Euro rescue deal according to Finance minister Fernando Texeira dos Santos. He said austerity measures required as a condition of the funds would see the economy shrink by 2% in 2011 and 2012.

Tax rises, privatisations and drastic cuts in pensions will form part of the major economic restructuring. The head of the European mission said the terms of the bail-out were ”tough“ but ”necessary and fair”.

Under the bail-out terms there will be an additional program of privatisations, and pensions exceeding 1,500 Euros will be cut. The sales tax on some products will rise. The aim is to cut Portugal’s budget deficit of 9.1% - three times the Euro zone's limit - to 3% by 2013.

Jean-Claude Juncker, head of the group of Euro zone finance ministers described the version as “stupid”