ECONOMY

Greece a serious concern for EU

Greece’s poor fiscal health remains a «source of serious concern,» the European Commission said yesterday as bond prices reflected lingering worries about the government’s ability to cut its deficit and service a massive debt load. In a quarterly report on the euro area, the Commission said yesterday that fiscal sustainability needs to be restored among member states as soon as possible. «In light of the ballooning public finance deficit, the Commission will come forward early next year with recommendations as to how to correct [Greece’s] excessive deficit,» it said. Last week, Prime Minister George Papandreou and Finance Minister Giorgos Papaconstantinou announced the government intends to slash four basis points off the country’s budget deficit in 2010 by upping revenues and cutting spending in a plan that will be detailed in January. However, talk of fiscal improvement by Greek government officials has failed to impress capital market investors. The premium that investors demand to hold 10-year Greek government bonds rather than eurozone benchmark German Bunds rose to a nine-month high of 278 basis points yesterday. Analysts said that thin pre-Christmas trading conditions have exacerbated moves in the spread and that Greek paper is looking «oversold» – a term used when experts believe a price has fallen too far based on fundamental and technical analysis. Meanwhile, German Finance Minister Wolfgang Schauble said that Germany cannot pay for Greece’s fiscal mistakes, reiterating his view that Athens must solve its budget problems itself. «The situation is uncomfortable,» Schauble told mass-selling German daily Bild in an interview. «Greece has been living beyond its means for years. The country cannot avoid saving and helping itself. We Germans cannot pay for the Greeks’ mistakes,» he added.