THE EUROPEAN Commission has reserved the right to ask EU governments to impose tough new austerity measures on the Greek government if its recovery plan misfires.

The threat from the EU executive came as outgoing economics commissioner Joaquín Almunia brushed off suggestions that an International Monetary Fund (IMF) intervention in Greece would be appropriate.

The EU through the institutions underpinning monetary union had enough instruments at its disposal to “cope with the challenge” and “solve this problem”, he said.

Moving to intensify scrutiny of Athens’ wayward public finances with a “quasi-permanent” monitoring programme from Brussels, Mr Almunia said the EU executive would ask prime minister George Papandreou to take further measures if high targets were not met in the coming months.

“Greece is required to submit a first report in mid-March 2010, spelling out the implementation calendar of the measures to achieve the 2010 budgetary targets, standing also ready to adopt additional measures if needed, and quarterly integrated reports from mid-May 2010 on the implementation of the recommendations, including on the reforms,” the commission said.

Power to impose budget measures on a government was vested in the Lisbon Treaty. The vote of the Greek government would be ignored in such a case. “It is the first time that the budgetary and economic surveillance instruments foreseen in the treaty are used simultaneously and in an integrated way,” Mr Almunia said.

While the commission has asked European finance ministers to follow its endorsement of Mr Papandreou’s recovery programme, it called for cuts in the public sector wage bill as well as healthcare and pension reforms.

Only one in five retiring civil servants should be replaced, it said. Mr Papandreou should also create a contingency reserve amounting to 10 per cent of current expenditure.

Athens has been told to bring its deficit – 12.7 per cent last year – below the EU limit of 3 per cent by 2012. “This is in the interest of the Greek people, who will benefit from better and more durable growth and job opportunities in the future, and it is in the interest of the euro area and of the EU as a whole,” Mr Almunia said.

He welcomed new cuts from Mr Papandreou, saying they strengthened his government’s resolve. However, he warned that pressure on Greece from the financial markets could not be ignored. “If decisions are adopted in the right direction . . . this will have a positive effect on the markets. If decisions are not there, regardless who said what, the markets will be putting additional pressure, and very, very important strong pressure.”

The commission has initiated legal action against Greece over its failure to produce reliable statistics, lapses that led to drastic revision of the deficit forecast when Mr Papandreou came to power last autumn.

The incoming commission will seek powers to initiate audits of the Greek statistical service where it believes there are grounds for suspicion. A recent report found endemic failures.

Europe will not come bearing gifts for Greeks: page 13