Greece's debt crisis dominates talks among EU finance ministers

BRUSSELS, Belgium — Worries over Greece's swelling debt will dominate two days of talks between European Union finance ministers that started Monday, as the euro fell to a ten-day low against the dollar.

Greece is trying to assure financial markets - and other EU governments - that it will reduce debt with a program of deep spending cuts and higher taxes.

It is aiming to bring its massive deficit down to the EU limits intended to underpin the stability of the euro.

EU officials have stressed that Greece has to take action because its problems were also a problem for the entire euro area. Wouter Bos, the Netherlands' finance minister, told reporters before the talks Monday that it was "a good thing that the Greeks realize their responsibility."

Greece's ability to manage its debt crisis is being called into question by markets, who see a higher risk that the government could default or need to seek a bailout - the first in the eurozone - from reluctant richer nations such as Germany.

A Greek default would trigger deeper problems for the currency union, highlighting the failure of allowing each country to manage its own economy. At the very least, a default would also raise borrowing costs for other indebted eurozone governments.

Such speculation has seen the euro tumble to $1.4336 on Monday, the lowest since Jan. 8 - and some relief for exporters who fear that the continued high value of the currency has depressed demand for German cars and machine parts and French luxury goods.

The 16 eurozone finance ministers met Monday to discuss their economy and differences between how each state is faring.

The economic crisis has exacerbated these divergences, with Spain's jobless rate of 19.4 per cent almost five times higher than the Netherlands', at 3.9 per cent. Each country is tackling the crisis in its own way. Some, like France, are borrowing heavily to stoke demand, while others, like debt-laden Ireland, are shunning economic stimulus for debt reduction.

The head of the International Monetary Fund, Dominique Strauss-Kahn, warned Monday that governments should carefully time the end of stimulus programs that are driving economic growth because the global recovery "remains very fragile."

Finance ministers from all 27 EU nations meet for talks Tuesday that will likely criticize Greece in the wake of a report from the EU statistics agency last week that said the country had falsified official economic statistics to make its deficit look smaller in the past.

The new centre-left Greek government has promised reforms to make statistics collection independent of political interference.

However, the EU executive has hinted that it may take legal action because Greece did not fulfil its duty to report quality data to the EU commission. That could lead to a court ruling forcing Greece to make reforms under threat of daily fines.

Source:AFP