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Greece warns on budget cuts pressure

Greece - EU finance ministers meeting today
Greece - EU finance ministers meeting today

Greece has faced down pressure from other euro zone members to step up budget cuts, as the EU again questioned its past reporting of public finances.

Greece is the first country in the euro's 11-year history to require an emergency statement of political support from other European countries as it struggles to weather pressure from financial markets worried about its massive debt.

But Finance Minister George Papaconstantinou warned against asking the government, which faces growing public dissent over budget cuts, to do too much too fast.

'We're trying to change the course of the Titanic, it cannot be done in a day,' he said ahead of a meeting with euro zone finance ministers in Brussels.

Greece faces two major hurdles in the coming months, with two lots of more than €8 billion of government bonds to refinance on April and in May. Markets had hoped last week that meetings this week might generate commitments of actual financial aid.

But European Monetary Affairs Commissioner Olli Rehn suggested that the talks in Brussels, which officials said were not aimed at producing a concrete rescue plan, would focus on demanding more of Greece than it has announced.

Rehn said ministers backed Greece's three-year plan and this year's target of a four percentage point cut in the deficit - to 8.7% of gross domestic product from 12.7% of GDP in 2009 - but that it might be hard to achieve.

'We expect that in due course the Greek government will take necessary additional measures to reach that target,' he said.

EU leaders are hoping that pressure and a concerted effort by Greece will be enough to get on top of the country's deficit and debt problems and ease markets' concerns.

Although leaders said little of how they may help, they have said they are ready to take 'determined and co-ordinated' action to safeguard financial stability in the euro area if needed.

That was designed to send a signal to the bond and currency markets - where Greek bond yields have risen and the euro has weakened - that Greece will not be allowed to default on its debt and that the euro is not threatened.

Adding to Greece's woes, a European Commission spokesman said today that clarification was being sought on media reports that Greece in the past resorted to derivatives contracts that helped lower the level of debt and deficit it reported.

Greece had not informed EU statistics agency Eurostat of any dealings with Wall Street banks of the kind reported by German and US media over the weekend, European Commission spokesman Amadeu Altafaj said.

Responding in comment to reports, Greece's Papaconstantinou said: 'The kind of derivatives contracts reported by some newspapers were legal at that time. Greece was not the only country to use them.'