Eurozone concerned about Greece

Commissioner calls for crucial institutional reforms; government says it is up to the task at hand

Greece’s public finances have become a “concern for the whole euro area,” according to European Commissioner for Economic and Monetary Affairs Joaquin Almunia, who said the Greek government needs to move ahead with crucial institutional reforms.

Economic statistics provided by Greece “were completely wrong,” Almunia said in Brussels yesterday, adding that the challenges facing the country are “high” and “a question of common concern for the whole euro area.”

Greece admitted last month that its budget deficit will come in at 12.7 percent of gross domestic product in 2009 as opposed to the 3.7 percent shortfall originally estimated.

Responding to the comments, Finance Minister Giorgos Papaconstantinou said in Athens that the government is determined to restore the credibility of its macroeconomic statistics and reduce its large fiscal deficit.

“A country that has a deficit of 12.7 percent of GDP and a public debt with the dynamics of ours clearly creates a broader concern in the eurozone,” he told reporters.

In its autumn forecasts, released last week, the EU’s executive Commission sees Greece’s budget deficit remaining above 12 percent of GDP through to 2011 – at 12.2 percent in 2010 and 12.8 percent in 2011.

“We do not share the European Commission’s projections that see the [Greek budget] deficit over 12 percent in the coming years. This projection was made without taking into account the change in policy,” said Papaconstantinou, who believes he can lower the budget deficit to below 10 percent next year.

“We are changing policy and this will be reflected in the next budgets,” he said.

To show it is serious about restoring credibility, the minister said he had invited EU statistics agency Eurostat to join an independent committee he will set up to look into what went wrong with the country’s macroeconomic statistics.