The president of the European Commission has said the EU will endorse Greece's plan to cut its huge budget deficit, despite some risks. Jose Manuel Barroso said the Greek plan looked 'feasible and ambitious'.
Greece is facing distrust in international markets about its ability to keep its public finances in check, has tabled a plan to cut its budget deficit to below the EU's cap of 3% of gross domestic product in 2012 from last year's expected 12.7%.
Commission President Jose Manuel Barroso said the plan looked feasible and ambitious, although surrounded by risks.
'Provided such risks will not be allowed to materialise through the timely implementation of corrective measures the deficit will indeed be corrected. We believe this will be done,' he said.
Greece's financial problems have sparked talk about a possible bail-out by the EU and fears about the stability of the 16-country euro zone. Mr Barroso stressed that a successful reduction of the deficit was important not only for Greece but for the euro area and the EU as a whole.
Greek minister attacks 'speculators'
Earlier, Greece also said that its problems were also an issue for the whole of the euro zone, warning other members may fall prey to what its leaders called an 'unprecedented' attack by speculators.
Financial markets have been pounding Greece for weeks and the premium investors demanded for holding Greek debt rather than German buns hit a euro lifetime high of around 4.05 percentage points last Thursday.
'Following Greece, there are other countries, like Spain and Portugal,' Finance Minister George Papaconstantinou told an economic conference. 'This is why the Greek issue, despite its particular Greek characteristics, is also a euro zone issue,' he said.
Meanwhile, Nobel economist Joseph Stiglitz has told the conference that the EU and the European Central Bank should create a crisis mechanism like the US Federal Reserve to help debt-hit member states such as Greece.
The economist said there was a lack of 'European macro-economic structure' to help countries with particular difficulties. 'In the US we have a huge national budget that can be allocated to parts of the country that are suffering,' he said.
Mr Stiglitz said that while the ECB regularly lent to national banks at rates lower than the international market, the same option was not currently available to governments.
'If you are willing to lend to banks, why not lend to governments? Does Europe not have confidence in the governments that constitute it?' he argued.
