The European Commission said in Brussels yesterday that the high debt levels of Italy and Greece were a cause for concern and that the two member states’ fiscal records left a lot to be desired. «Italy and Greece give most cause for concern as the debt levels remain well above 100 percent of GDP (gross domestic product) and very little progress has been made in the past four years to reduce debt levels toward the 60 percent of GDP reference value,» the Commission said in a report to finance ministers and the European Parliament. «It would have been expected that these countries would have recorded a substantial reduction in their debt…. However, this has not happened, mainly due to large financial transactions that placed a particular burden on debt and/or due to failure in attaining fiscal targets,» the Commission said. The Commission earlier unveiled proposals modifying the Stability and Growth Pact by placing a greater emphasis on a country’s debt level, bringing it on an equal footing with budget deficits as fundamental criteria of the soundness of economic policy. «Member states with debt levels clearly higher than 60 percent of GDP will be asked to include in the stability programs they submit ambitious strategies for their long-term reduction,» it said in the report called «budget policy coordination proposals.» Greece’s debt is the second highest in the EU after Italy, having been recently revised upward by Eurostat to 105.2 percent of GDP from an initial projection of about 96 percent. Italy’s debt stands at 110.3 percent. Belgium’s debt is also above 100 percent. Economic Affairs Commissioner Pedro Solbes said member states would have to reduce their debt by about four percentage points annually, although highly indebted countries would be expected to perform even better than that. According to the Stability Pact, member states must aim to reduce their debt levels to below 60 percent of GDP and have budget deficits at no more than 3 percent. The proposals, which include sanctions against member states failing to achieve progress, will be submitted for approval by the EU heads of state at their summit in Brussels in March, during the Greek term of the six-month rotating presidency. The revision of the Pact became necessary after influential EU members such as Germany and France refused to abide by the guideline for a maximum 3 percent budget deficit. Economy and Finance Minister Nikos Christodoulakis, after meeting his German counterpart, Hans Eichel, in Berlin, dismissed suggestions that Germany is seeking to overturn the Stability Pact. «The revision is a cushion against leniency. Small countries have an interest in keeping the rules of the game while the big ones tend to adopt a more flexible interpretation because they are stronger,» he said.