The European Commission will tomorrow adopt recommendations suggesting how Greece should reduce its deficit, reform its economy and improve the quality of its economic data.
The Commission’s proposals, which EU finance ministers are expected to adopt on 16 February, will call for Greece to bring its deficit back within 3% of its gross domestic product (GDP) by 2012, a goal to which the Greek government has already committed itself.
Greece estimates its deficit in 2009 at 12.7% of GDP, the largest in the eurozone. The EU’s stability and growth pact requires deficits to be below 3%.
José Manuel Barroso, the Commission’s president, today said that “a deficit of such magnitude must be decisively corrected”.
He indicated that the Commission’s proposals would include measures drawn up by the Greek government to improve its public finance.
“The Commission will recommend tomorrow that the Council [of Ministers] should endorse the Greek action plan,” Barroso told journalists.
He said the 2012 target is “feasible but is subject to risks”.
“Provided that such risks will not be allowed to materialise, through timely implementation of corrective measures, the deficit will indeed be corrected,” he said.
The Commission will also propose that Eurostat, the EU’s statistical office, should be given powers to audit member states’ public finances.
The Greek government in October revised its deficit projections sharply upwards, prompting heavy criticism from the Commission and member states about the quality of the country’s economic data.
Barroso said that the Greek deficit resulted from “a combination of budgetary slippage and statistical misreporting”.
He said that the Commission will put in place a strict monitoring regime to assess whether Greece is sticking to its deficit-reduction plan.
A first Commission evaluation report is expected in March, followed by another in May. After that a quarterly reporting system will be introduced.
Barroso said that there would be “a very intense surveillance of budgetary developments in Greece”.
“We will do it in a rigorous way,” he said
Barroso described the correction of the deficit as “not only important for Greece, but also for the eurozone and for the European Union as a whole”.
The Commission’s president also gave a broader warning about fiscal imbalances in the EU. “The persistent existence of certain surpluses is a factor that contributes to the negative spiral that we are now watching,” he said.
“It is a situation that in the end will backlash on surplus countries because deficit countries will at the some point be at risk of default,” he added.
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