Rehn urges Greece to make further cuts

With a total debt pile estimated at €300 billion, and a budget deficit that reached 12.7 percent of GDP in 2009, Athens has already unveiled a package of spending cuts and tax rises this year, sparking a rolling series of protests and a one-day general strike.

But an EU monitoring team to Greece last week concluded the list of current measures would only reduce the country's deficit by two percent of GDP, partly because the country is suffering its first recession in 16 years, and not the four percent promised to Brussels.

In urging the government to implement "additional measures", Mr Rehn said the present juncture was a a "critical moment" for the future of Greece.

"No member of the eurozone area can live permanently beyond its means ... Either you keep your debt under control or your debt starts controlling you," he said.

Spending cuts, tax rises

In response, Athens looks set to announce additional measures this week, with analysts predicting a further petrol tax rise, a possible VAT increase, and further cuts to the public sector.

After winning a landslide election last October, Greek Prime Minister George Papandreou's party remains high in opinion polls despite the austerity measures.

"Today, we ask Greek men and women to enlist in our common cause to save our country and the overwhelming majority of our citizens are willing to do it despite the price and despite the burden ... Everybody says yes," Mr Papandreou said on national television on Monday night, in apparent preparation for fresh measures.

In January the Greek government announced public-sector spending cuts and tax hikes as part of a three-year EU stability and growth programme, followed by additional measures including a wage and hiring freeze and levy on fuel the following month.

A budget revision by the newly elected government last October revealed the true state of Greece's public finances, causing widespread unease in financial markets and a subsequent flight from government bonds.

With €20 billion of debt set to mature this April and May, the Greek government is frantically looking for additional funding, and may launch a fresh bond issuance this week.

During his press conference in Athens, Mr Rehn refused to be drawn on reports that Berlin and other EU capitals are preparing to provide Athens with financial aid, saying the "ways and means" to ensure the financial stability of the euro area was safeguarded.