Greece facing another EU rebuke

THE EUROPEAN Commission is preparing to hand down another rebuke to Greece over the dire state of its finances as Athens struggles to convince markets that it can settle its problems on its own.

Although high-level officials have made it clear that the European authorities would not abandon Greece, outgoing economic and monetary affairs commissioner Joaquín Almunia downplayed reports of extraordinary measures to support the country.

“Solidarity is possible, [it] will exist. A bailout is not possible and will not exist,” Mr Almunia said at Davos.

In one of his last acts before assuming the competition portfolio, Mr Almunia will cast judgment next Wednesday on a new austerity programme from prime minister George Papandreou.

While setting a new deadline for Greece to bring its 12.7 per cent deficit to heel, the commission is also likely to send it a formal “warning” for running dangerous policies. The European authorities are likely to step up surveillance of Greece’s public finances, with reports on the situation every two months from June.

Amid concern about the reliability of Greek financial figures, they also want to be given new powers to conduct formal audits of the country’s statistics office. EU governments turned down a request for similar powers five years ago.

With anxiety about Greece intensifying pressure on other debt-dependent euro members, Spain yesterday became the latest European country to adopt new budget measures.

Finance minister Elena Salgado said the government will, by 2013, bring its budget within the EU’s 3 per cent limit from 11.4 per cent last year. Spending cutbacks totalling 4 per cent of gross domestic product include a 4 per cent cut in public sector pay.

The Polish government, meanwhile, said it will curtail spending growth and change military and police pension rules to strengthen its fiscal position. Poland hopes to adopt the euro in 2015, but must bring its deficit to 3 per cent or below in 2013 to qualify.