ECONOMY

Rehn urges Greece on measures

The European Union yesterday urged Greece to take additional austerity measures within days to tackle its debt problems amid growing speculation that a rescue plan is close to being finalized for the country. «I’m sure that together we shall overcome these formidable economic and fiscal challenges,» said EU Economic and Monetary Affairs Commissioner Olli Rehn after meeting with Finance Minister Giorgos Papaconstantinou in Athens. «I want to encourage the Greek authorities to consider and announce additional measures in the coming days to meet this target,» Rehn said. The government has already announced two waves of deficit-cutting measures, including a pay freeze and cuts in income supplements in the public sector, increased taxes, a crackdown on tax evasion, higher fuel duty and public spending cuts. But Prime Minister George Papandreou has indicated that extra measures will be taken if needed to achieve the deficit target. Among measures under consideration are an increase in value-added tax, a luxury goods tax, a further fuel duty hike, a freeze in public sector pensions and possible further cuts in state spending. Greece’s borrowing costs tumbled to their lowest level yesterday on expectations the government will soon push through the tougher measures and receive tangible EU support. German lawmakers say euro-area officials are devising a plan to grant Greece about 25 billion euros in aid should the need arise, possibly by using state-owned lenders, such as the KfW Group, to buy its bonds. The difference in the yield between 10-year Greek bonds and benchmark German Bunds narrowed to 311 basis points, the lowest since mid-February. The prospect of aid to Greece also led to a decline in the cost of insuring against a Greek default as credit-default swaps linked to Greek government bonds tumbled 28.5 basis points to 335.5 yesterday.