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 (96 billion pounds) 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 (Berlin: MXG1.BE - news) , 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.
The European Commission forecast on Friday that unless policies changed, Greece would have a budget deficit of 9.5 percent of GDP this year and 9.3 percent in 2012 -- well above the targets agreed in the EU/IMF programme.
Greek debt would rise to 157.7 percent of gross domestic product this year and to 166.1 percent in 2012, rather than be 145.2 and 148.8 percent as under the EU/IMF plan targets, the Commission forecast.
Rehn called on all political parties in Greece to support the tough austerity and structural reform programme.
Last Wednesday police fired teargas as some 20,000 protesters marched on the parliament as part of a 24-hour nationwide strike against the Socialist government's biting austerity drive.
"Greece is facing a serious situation and I call on all the political forces to show such kind of responsibility that is required in this very serious situation," Rehn said.
"This is a real credibility test of Greek political forces and ultimately a test of the political will of the Greek people," Rehn said.
He reiterated it was premature to talk about a second bailout programme for Greece to cover Greek financing gaps in 2012 and 2013, despite projections that Greece may need up to 65 billion euros more to tide itself over for those years.
Many economists expect some form of extra financing will be necessary for Greece as the country is unlikely to be able to return to markets next year as envisaged by the original bailout plan, set up in May 2010.
But Rehn said the situation of Greece would be discussed at the next meeting of euro zone finance ministers on Monday.
reuters
