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Euro ministers firm on Greek debt

Greece received a stern message over its bloated debt when Germany and other euro zone countries said it was up to Athens to sort out the problem, even if it could count on their backing.

With financial markets fretting over Greece's ability to service one of Europe's biggest sovereign debts, the warning came from German Finance Minister Wolfgang Schaeuble and others at a Eurogroup meeting of euro zone ministers in Brussels.

“We have a new government in Greece. It must cope with a difficult task,” he told reporters on arrival for regular talks where he and counterparts received an update on Greece's difficulties and its plans for dealing with them.

“In tackling it, they are entitled to support but that doesn't mean that we can spare Greece taking the necessary steps.”

Dutch Finance Minister Wouter Bos put it even more bluntly.

“We should encourage countries to show they are aware of their own responsibility to get their finances in order. This (responsibility) is primarily for the country itself,” he said.

“I think the Greeks are aware of the seriousness of the situation. I can understand why the markets are not convinced yet.”

Asked whether other countries would help Greece, Bos added: “The core of what needs to be done needs to be done by the Greeks themselves.”

Greece's ballooning budget deficit and debt of more than 120% of GDP have triggered downgrades by debt rating agencies and market speculation about whether the country can service its obligations or might even have to quit the 16-country euro zone.

Athens says it plans to reduce its budget deficit this year to 8.7% of gross domestic product from a 2009 figure of 12.7%. A longer-term stability plan aims to bring the shortfall to 2.8% in 2012, below the 3% limit of the European Union's Stability and Growth Pact.

Jean-Claude Juncker, chairman of Monday's talks, told a post-meeting news conference: “We believe the Greek government will do what is necessary and we have to support them in their efforts because the program concerns Greece first and foremost, it is true, but it also concerns the whole euro zone.”

The ministers, who confirmed Juncker in his role as Eurogroup chairman for the next two years, listened to Greek Finance Minister George Papaconstantinou at the Brussels talks. More serious discussions on the details of Greece's plans are due to follow at a February meeting of the Eurogroup.

Juncker and European Commissioner Joaquin Almunia said it was clear Athens understood the scale of the problem and had set ambitious goals.

However, they had not yet got around to the finer details of how the Greek government would secure the goals, for example on mooted pension reforms and measures that would apply to the public sector, as Almunia put it.

Greece's Papaconstantinou told reporters after the meeting: “We presented a very ambitious fiscal consolidation program with very detailed measures to be taken in 2010. You have heard the commissioner and president of the Eurogroup (Juncker). This is a solid base for the implementation.”

Markets are awaiting the European Commission's view on the long-term deficit targets Athens has announced.

The ministers also discussed flaws in Greek statistics after a report by the EU's executive Commission showed Greece had for years misreported budget deficit data because the statistics system was open to political influence.

Almunia said the ministers planned regular follow-up talks on Greek progress on budget consolidation and that these would involve at least three sessions between June and the year-end.

The remarks from Germany's Schaeuble and Dutch minister Bos revealed what some officials said off-record was a high level of irritation with Athens ahead of the Brussels discussions.

Greek data for 2008 was revised to a deficit of 7.7% of GDP, from 5.0% initially, and the Socialist government that took power in October announced a forecast of 12.7% for 2009, twice the level the preceding government had spoken of and three times as big as earlier official targets.

The EU stability pact rules on deficit control ultimately allow for fines of a maximum of 0.5% of GDP to be imposed on countries that fall out of line but the situation has never gone that far.

Asked by reporters whether such a step could be taken on Greece, Schaeuble replied: “It's all in the EU treaties.” (Reuters)