GREECE came under huge pressure from other eurozone countries in Brussels last night to make further and immediate cuts in government spending.
But the Greek finance minister resisted the demands and called instead for the EU to announce more explicit support for his country.
At the meeting Finance Minister Brian Lenihan put distance between Ireland and the rest of the eurozone countries now under pressure including Greece.
“Ireland is now at a different stage to those countries now attracting the most adverse comment,” he told the ministers.
He said the market, that continues to attack the euro, now recognises the progress Ireland has made and that the cost of credit had “remained relatively steady over the recent crisis”.
The Irish economy will bottom out by mid-year and see some growth in the second half of 2010. “I am cautiously optimistic we are turning the corner,” he is reported as telling the meeting, adding that the necessary price and wage adjustments are underway to restore competitiveness.
Ireland had taken the difficult decisions and cut spending by 5% of GDP last year and intended to deliver another 2.5% this year, he said. He has undertaken to get the budget deficit back to under 3% of GDP by 2014 from an expected 11.6% this year.
Greece has said it will cut its deficit of 12.7% in just two years bringing it under the 3% deficit threshold. But the country’s credibility is low because the previous government under-reported the deficit. The new European economics commissioner Ollie Rehn added to the pressure when he told journalists before last night’s meeting that risks were materialising and said “there is a clear case for additional measures”.
Next month, commission experts will report on Greece’s progress on cutting its spending.
Luxembourg’s Jean-Claude Juncker who leads the group of 16 eurozone countries, said that if by mid-March Greece was not on track, “additional measures” will be necessary.
Greek Finance Minister, George Papaconstantinou, said he doubted that if he announced new cuts, it would stop the markets attacking Greece.
“My guess is that what will stop markets attacking Greece at the moment is a further more explicit message that makes operational what was decided last Thursday”, he said referring to a statement of support by EU member states government leaders.
Mr Papaconstantinou argued for the ministers to work out a mechanism that would allow a bailout if necessary.
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