VARIOUS/FILE: Greek woes set to dominate EU summit, euro-zone facing biggest challenge since its creation

Record ID: 491356

  • Title: VARIOUS/FILE: Greek woes set to dominate EU summit, euro-zone facing biggest challenge since its creation
  • Date: 11th February 2010
  • Summary: ATHENS, GREECE (RECENT) (REUTERS) ATHENS MAIN CONSTITUTION SQUARE WITH GREEK PARLIAMENT IN BACKGROUND GREEK FLAG ON TOP OF PARLIAMENT PEOPLE WALKING ON STREET ATHENS, GREECE (RECENT) (REUTERS) GREEK TAX OFFICIALS ON STRIKE, SHOWING BANNER READING ''WE WONT MAKE SACRIFICES FOR THE PLUTOCRATS" PROTESTERS SHOUTING ''IT WON'T PASS''
  • Embargoed: 26th February 2010 12:00
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  • Topics: International Relations,European Union
  • Reuters ID: LVA24QM60DP0MXLV4SODBMLI2ZJ8
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  • Story Text: The extraordinary February 11 EU summit in Brussels was initially called to thrash out long-term growth strategies for the bloc of 27 countries. But European governments and finance ministers were considering on Wednesday various options to help Greece deal with its massive public deficit.
    The agenda for Thursday is likely to be dominated by what legal justifications and measures euro-zone countries can come up with to rescue Greece and possibly struggling EU countries. Eurozone rules prohibit bailouts for struggling economies.
    Article 122 of the EU treaty says the EU Council can decide "upon the measures appropriate to the economic situation", but adds that such steps should mainly be if severe difficulties arise in the supply of certain products, notably energy.
    It also says the Council may grant, under conditions, financial assistance to a member state, if that state "is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control". It may be hard to argue Greece's budget deficit developed because of factors outside its control.
    Greece has estimated it will need to borrow about 53 billion euros ($73 billion) this year to plug fiscal shortfalls and refinance its debt. Last month it raised 8 billion euros with a five-year bond issue, but was forced to offer a very high yield.
    It is the biggest fiscal crisis Greece has had to face in decades. But also the biggest challenge to the euro-zone since its inception.
    The shortfall in its public finances has prompted a series of downgrades by rating agencies and unnerved financial markets worried that Athens may not be able to service its debt -- which is expected to hit 120 percent of GDP this year.
    Greek Prime Minister George Papandreou said on Wednesday his government would do everything necessary to hit its 2010 deficit target and would fully implement its austerity budget programme.
    Those austerity measures have led to protests by tax officials and members of the ADEDY public sector union.
    On Tuesday the outgoing EU Economic and Monetary Affairs Commissioner Joaquin Almunia urged EU leaders tell Greece on Thursday that it will receive the bloc's support in exchange for clear budget commitments.
    Many EU governments are concern Greece will not be able to service its debt.
    "I would like the leaders of Europe to say to the Greek authorities that in exchange for the efforts you are making, you are going to get support from us. You don't get support for free. That would simply lay the foundation for further imbalances and crisis. The support needs to be clear and we have got instruments to provide that in exchange for clear commitment that they will meet their responsibilities," Almunia said.
    The Commission and European Central Bank (ECB) have endorsed Greece's fiscal austerity programme and urged Athens to implement it strictly. Neither have mentioned any bailout for the country.
    Other Euro zone members Spain, Portugal and Ireland are also under acute pressure because of their swollen deficits and have launched sweeping measures to rein in their stretched budgets.
    Sources in Germany's ruling coalition said Berlin was in intensive international and domestic talks about possible aid to Greece.
    They said agreement on who would help Greece, and by how much, could be made on the sidelines of the EU summit but the German government had made no decision yet on concrete aid measures.
    Paul Taylor, Reuters European Policy columnist, believes the will to help is there and that the euro-zone has a duty to help its members weather the storm effectively.
    ''There is obviously a strong temptation in some countries to say 'Greece got itself into this mess, it fiddled the statistics, it has lived above its means, it hasn't made the necessary cuts and therefore it should be left to default'. But the risk of, from a default for other Eurozone members and ultimately for the Euro project itself is such that I think that countries will want to support Greece,'' Taylor said.
    European Central Bank chief Jean-Claude Trichet will be at the February 11 summit. Leaders will also discuss how to improve economic policymaking to boost long-term growth -- a debate that will culminate in the adoption of the "EU 2020" programme this year.
    Also on the agenda should be help for Haiti and ways to improve the EU's response to natural disasters as well as strategies for talks on a deal to fight global warming.
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