Greece’s fiscal cutback plans are ambitious, surrounded by risks but achievable, and the European Commission fully endorses them, EU Economic and Monetary Affairs Commissioner Joaquin Almunia said yesterday. Almunia’s remarks come two days before the Commission publishes recommendations on how and by when Greece should reduce its huge budget deficit to below the European Union’s ceiling of 3 percent of gross domestic product. «What we are saying to the Greek authorities is: ‘Your stability program has established ambitious targets and objectives and we fully endorse these ambitious objectives,’» Almunia told Reuters. «We consider that the achievement of these objectives in the coming three years, before the end of 2012, is absolutely necessary. These objectives are achievable but they are surrounded by risks.» The Commission, the 27-country EU’s executive body, will publish tomorrow its opinion on the Greek long-term deficit-cutting plan, which aims to reduce the budget shortfall to below 3 percent in 2012, from 12.7 percent in 2009. Such a recommendation can be issued under the new EU treaty when the economic policies of an EU member are not in line with the broad policy guidelines adopted by the bloc or risk jeopardizing the proper functioning of the 16-country eurozone. Almunia said the Greek government was aware of the risks surrounding its deficit plan. «In our recommendations, we are creating a process of monitoring the implementation of the program that includes the need to adopt additional measures in case some of those risks will materialize,» he said. «We will not accept slippages on the path to the targets,» he added. «Every time we see slippages, because some risks materialize, we will ask for additional measures to correct these slippages.» The premium that investors demand to hold Greek debt narrowed for a second day yesterday after widening for most of last week. Greek 10-year notes rose, pushing the yield down 22 basis points to 6.63 percent. Greek two-year notes fell, pushing the yield up 6 basis points to 5.89 percent. Meanwhile, the cost of insuring Greek government debt against default rose to 401,200 euros per 10 million euros of exposure yesterday, according to five-year credit default swap prices from CMA DataVision. Experts see EU in crucial role Greece should be able to meet the challenges it faces from aggressive hedge funds on capital markets if it introduces measures to tame the deficit and has the European Union on its side, said EFG Eurobank economist Gikas Hardouvelis. «The markets are dragging Greece into bankruptcy,» Hardouvelis told a conference in Athens yesterday. Peter Attard Montalto, an economist at Nomura Holdings, also said yesterday that the EU should support Greece just as it helped provide bailouts for its members from Eastern Europe to save them from default. «Greece is just as interconnected with the rest of the EU as Hungary and Latvia were, and the contagion risks are similar,» London-based Montalto wrote in a note. «We see no reason why the European Commission would be less inclined to provide support to avert a snowball effect.» Bumpy road ahead for bonds, says UniCredit Any recovery in Greek bonds will be uneven as the country’s European Union partners pressure the government to fix its finances, according to Italian lender UniCredit. The decline in Greek bonds «was probably overdone but with the EU possibly moving tougher on Greece, the way to spread recovery will remain bumpy,» Luca Cazzulani, a strategist in Milan, wrote in a note yesterday. The yield premium investors demand to hold Greek 10-year government bonds over German Bunds widened to almost 400 basis points last week, the highest since the year before the euro’s introduction in 1999. It was down to 344 basis points yesterday. Deutsche Bank told investors yesterday they should sell the debt of so-called peripheral European nations, such as Spain and Portugal, predicting that Greece’s fiscal position is likely to worsen.