ECONOMY

More budgetary action needed, says EU

Greece must take additional steps to consolidate public finances this year because it is missing its deficit reduction targets, EU Economic and Monetary Affairs Commissioner Olli Rehn said on Friday.

Greece is struggling to put its public finances in order under a joint European Union and International Monetary Fund bailout programme under which Athens will get emergency loans of 110 billion euros over three years.

In return for the loans, Greece has committed to bring its budget deficit down to 7.6 percent of gross domestic product this year, 6.5 percent in 2012, 4.9 percent in 2013 and 2.6 percent in 2014.

“Because of weaker than expected growth last year, plus some fiscal slippages, there is need to take additional measures in fiscal consolidation still this year,» Rehn told a news conference.

“How much will depend will the assessment on our mission currently in Athens. Yes, definitely there is a need to take further consolidation measures,» he said.

The mission, which comprises representatives of the IMF, the European Central Bank and the Commission, is likely to finish work next week. It is also conducting an analysis of Greek debt sustainability, with debts forecast to rise to more than 160 percent of GDP next year.

Meanwhile, European Central Bank Governing Council member Ewald Nowotny was quoted as saying on Friday that Greece seems not to have met terms of its international rescue package recently.

“Greece has apparently not fulfilled the conditions sufficiently of late. The issue of privatisations will be the most sensitive point here,» Austria’s Kronen Zeitung quoted him as saying.

It appeared to be the first public confirmation that a joint inspection team from the ECB, the European Commission and the International Monetary Fund has found shortcomings in Greece’s implementation of its bailout programme.

On Thursday, Greek government sources told Reuters the troika inspectors were pressing Athens to slash public spending further to make up for a likely shortfall in revenue this year.

“They are forming an opinion that there are difficulties,» said one senior government official who requested anonymity. «They are concerned there is a high risk revenue targets will not be met and are pressing for more spending cuts.”

At stake is a 12 billion euro tranche of aid due next month and key to paying 13.7 billion euros of immediate funding needs. Without it, Greece could effectively default.