European Union finance ministers will warn Greece on Tuesday that it will have to step up harsh budget cuts if it can't prove by March 16 that an existing austerity program will shrink its massive deficit this year.
Greece has promised to reduce its budget gap from 12.7 per cent of gross domestic product to 8.7 per cent, seeking to calm market worries that it could default on its debt and require a bailout from the 16 countries that use the euro.
Eurozone leaders pledged last week to help Greece “if needed to safeguard the financial stability of the euro area as a whole” —but did not say how any bailout would work.
French Finance Minister Christine Lagarde said this showed “firm and unmoveable political support” for Greece.
But eurozone finance ministers want Greece to do more and asked Greece on Monday to ready new spending cuts, increase sales and energy taxes and impose new levies on luxury goods, including cars — and the wider EU is expected to back that call on Tuesday. The Greek government, which is also promising to reform pensions and health care, is facing opposition at home to its current plan to freeze public sector pay, with Greek customs officials walking off the job Tuesday for a three-day strike which will hamper imports and exports.
Spanish Finance Minister Elena Salgado, who leads the talks between all 27 nations on Tuesday, said she was “fully confident” that Greece would take any action that other EU countries ask of it.
“In one month from now the European Commission will evaluate the situation again and we will see if it is necessary for Greece to take more measures,” she said.