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The European Commission yesterday endorsed a Greek plan to cut its budget deficit below three per cent of GDP by the end of 2012, but said it must take further steps to reduce public sector wages and put finances in order.
In an assessment closely watched by financial markets weighing Greece's credibility as a debtor, the European Union executive said Athens must submit an interim report on its deficit reduction progress by mid-March. It said the plan would not be easy to implement but Greece, whose problems have prompted suggestions the EU may have to bail it out and that other countries could run into similar problems, must be ready to make further deep fiscal adjustments.
"We are endorsing the Greek programme. But at the same time we know that the implementation of the programme is not easy. It is difficult. This deserves support," EU Economic and Monetary Affairs Commissioner Joaquin Almunia told a news conference. "If the programme is followed by decisions, by actions… this will have a positive effect on the market. If decisions are not there, the markets will be putting additional pressure."
Sharp upward revisions to Greek deficit and debt figures last year led to ratings downgrades and sent yields soaring, further denting investors' confidence.
Asked if Europe might have to turn to the International Monetary Fund for help, Almunia said he was confident the 27-country EU and 16-state euro zone could cope on their won. EU officials have dismissed talk of a bailout for Greece.
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