Europe Gives Greece a Month to Show Deficit Reduction Plan Works

EU nations gave Greece a one-month deadline to show some effectiveness of its new financial plan
Europe Gives Greece a Month to Show Deficit Reduction Plan Works
Greek Premier George Papandreou speaks during a press conference after his meeting with the President of the European Council Herman Van Rompuy in Athens on Jan. 12, 2010. (Aris Messinis/AFP/Getty Images)
Kremena Krumova
2/17/2010
Updated:
10/1/2015
<a><img src="https://www.theepochtimes.com/assets/uploads/2015/09/GREECEC.jpg" alt="TROUBLED TIMES: Greek Finance Minister Giorgos Papaconstantinou arrives at a meeting with representatives of the eurozone nations on Feb. 16. at the EU headquarters in Brussels. Greece has been given until March 16 to show some effectiveness of its financial plan which aims to reduce the countries budget deficit.  (Georges Gobet/AFP/Getty Images)" title="TROUBLED TIMES: Greek Finance Minister Giorgos Papaconstantinou arrives at a meeting with representatives of the eurozone nations on Feb. 16. at the EU headquarters in Brussels. Greece has been given until March 16 to show some effectiveness of its financial plan which aims to reduce the countries budget deficit.  (Georges Gobet/AFP/Getty Images)" width="320" class="size-medium wp-image-1822974"/></a>
TROUBLED TIMES: Greek Finance Minister Giorgos Papaconstantinou arrives at a meeting with representatives of the eurozone nations on Feb. 16. at the EU headquarters in Brussels. Greece has been given until March 16 to show some effectiveness of its financial plan which aims to reduce the countries budget deficit.  (Georges Gobet/AFP/Getty Images)
The 15 other nations within the eurozone, to which Greece belongs, gave Greece a one-month deadline, coming due on March 16, to show some effectiveness of its new financial plan, which aims to gradually reduce its budget deficit to the limit for a European Union (EU) member. Otherwise, the country will face restrictive measures.

The eurozone refers to the 16 members of the European Union that use the euro as official currency. There are 27 countries within the EU, but the eurozone members are taking the lead to help the Greece since a downtown in its economy could devalue the euro throughout the other 15 countries that use it.

In November 2009, it was discovered that reports had been falsified to conceal a huge budget deficit, exceeding more than four times the limit of the EU, and a hidden national debt of $413 billion (300 billion euro), using sophisticated financial instruments. This is considered a large debt for a country with a population of approximately 11.3 million.

It was also discovered that the projected budget deficit for 2010 was more than four times an EU limit.

Some of the requirements the EU set for entering the eurozone are having a budget deficit of no more than 3 percent of gross domestic product (GDP), a national debt limit of up to 60 percent of GDP, and an inflation rate not more than 1.5 percent above that in the most economically stable member states.

In response to the stern criticism from the EU finance ministers in Brussels in January, the Greek government froze public officials’ salaries and raised gasoline and diesel taxes, which Greek officials hope will bring and additional $1.79 billion (1.3 billion euros) to state coffers. Initially, this triggered a huge wave of strikes throughout Greece.

Greek authorities promised to submit a report to the European Commission and to the European Central Bank on March 16. The report is to detail any positive effects of its recently implemented adjustment plan, which aims to lower its budget deficit by 4 percent of GDP in 2010, from 12.75 percent to 8.70 percent, and to further cut it to less than 3 percent in 2012, according to the conventions of the European Stability and Growth Pact.

The new EU commissioner for economic and monetary affairs, Olli Rehn of Finland, who took over the post from Spain’s Joaquín Almunia, warned that Greece will very soon have to explain how it used sophisticated financial derivatives to hide huge financial deficits.

According to EU officials, investment banks may have taken advantage of loopholes in procedures for reporting debt and deficit rates.

According to George Papaconstantinou, Greece’s finance minister, such derivatives were legal when the country used them, but they are no longer in use. According to a 2008 report from Eurostat on Greece, Greek authorities had confirmed that by law “government units could not enter into fictitious derivatives transactions.”

Now, some Greek officials face possible prosecution by the European Commission for improper statistical reporting.
Kremena Krumova is a Sweden-based Foreign Correspondent of Epoch Times. She writes about African, Asian and European politics, as well as humanitarian, anti-terrorism and human rights issues.
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