European ministers told Greece today it may need to take further steps to bring a swollen debt under control and calm "irrational" financial markets, as wage cuts already announced by Athens sparked another strike.
At a European Union meeting, finance ministers from Germany, Austria and Sweden led the charge, with Germany's deputy finance minister saying Greece should mimic Ireland and Latvia, both of which are slashing spending and wages savagely.
"We made it clear the ball is in Greece's court," said Joerg Asmussen. "Additional measures by Greece are needed."
That, and a statement issued by the ministers after the meeting, suggested clearly that the 30 days they have given Greece to prove itself before reporting back will in any case end with demands for more budget cuts or tax hikes, or both.
Greece is the first country in 11 years of European monetary union to require a political pledge of support as fears over its debt sparked a market attack that has dented the euro and lifted bond yields, making debt servicing even more challenging.
The ministers said nothing of specific support measures or aid, opting instead to heap pressure on Greece in return for the promise to support it if things get out of hand, a pledge made by European leaders last Thursday.
"The pressure on Greece to consider further measures by March 16th has clearly increased," Austrian Finance Minister Josef Proell said, adding no support measures had been agreed so far.
March 16th is a deadline the finance ministers set both for Greece to show its plan is being rolled out effectively and for them to decide what should happen next as they seek to sort out Athens' woes and prevent any broader shutout in debt markets.
Greece will then have to report back again in mid-May and every three months thereafter. Germany's Asmussen and others suggested the International Monetary Fund's advice, but not its money, would be needed too to help Athens meet the challenge.
European Monetary Affairs Commissioner Olli Rehn said that experts from the European Commission, IMF and European Central Bank "will be on the ground in Athens in the coming days" to check up on implementation of steps announced so far.“
Following the meeting, finance minister George Papaconstantinou said that Greece is ahead of its own deficit- reduction targets and will not require any bailout from the European Union.
"There’s no actual need for a bailout" he said following the meeting at which finance ministers reviewed Greece’s plan to trim its budget shortfall. “Greece has not asked for a bailout.”
Meanwhile Greek 10-year government bonds declined. The drop pushed the yield on the nation's 10-year bond up the most in almost three weeks as European Union Economic and Monetary Affairs Commissioner Olli Rehn said the EU has ways and means to safeguard stability in the euro area.
Officials meeting in Brussels today didn't provide specific measures for Greece. Investors expressed their skepticism about Greece’s efforts, pushing the risk premium on Greek debt higher for a third day.
Greek borrowing costs rose and the extra yield investors demand to hold Greek 10-year debt instead of German equivalents rose to 318 basis points, from 305 basis points yesterday - more than twice the difference at the start of November.
Credit-default swaps on Greek government debt rose 15.5 basis points to 370 points, according to CMA DataVision prices.
Reuters