Greece under EU pressure to introduce spending cuts

THE EU piled pressure on Greece yesterday when it announced that Commission, ECB and IMF experts will be in Athens in the coming days to see if they are making the necessary cuts to their spending.

Finance Minister Brian Lenihan said it was up to Greece to help herself out of her difficulties. “If Greece takes credible steps she will be in a position to help herself out of the situation. If there is an EU bailout, everyone including Ireland, pays,” he said.

At the same time the Commission is investigating reports that banks made massive loans to Greece and Italy during the last decade, hiding them from their eurozone partners as currency swaps rather than lending. In return Greece agreed to hand over airport fees and lottery proceeds to the banks for years to come. The result is that Greece probably has even higher debts than understood to date.

Following the finance ministers’ meeting in Brussels yesterday, Mr Lenihan said there had been no discussion of options for bailing out Greece, and they had agreed not to discuss what instruments were available to them to do so.

Austrian Finance Minister Josef Proell asked what would happen if Greece faced difficulty raising money in the weeks ahead told Reuters the matter was an affair for Athens to handle first but Europe stood behind it.

The ministers will receive an assessment on March 16 on whether Greece needs to make additional cuts in spending and increase tax. If the Commission decides they do, the eurozone ministers, except for Greece, will vote on it and the majority decision will be binding.

Mr Lenihan said: “The position of Ireland is that I trust the Commission, advised by the European Central Bank, because the credibility of the euro itself is at stake.” He added that Ireland would attach considerable weight to whatever recommendation the Commission makes.

He dismissed fears of a backlash from the Greek public to demands for increased savings, saying there was a far greater risk of a backlash, especially in Germany and the Netherlands, because of one country behaving recklessly. “They increased public pay by 30% over the past three years,” he said, adding there was a danger that every member state would have to pay for this.

“We want to protect the currency. We do not want it compromised. If the worst happens we will get behind it then.” he said.

He ruled out IMF intervention, saying the eurozone had a common currency while the IMF was made up of countries with competing interests and currencies. However, the markets could decide the fate of Greece in April and again in May when two lots of sovereign debt worth €8 billion each have to be refinanced.