Saturday

23rd Jun 2018

Greek deficit 'endangers' euro, EU commission says

  • The EU commission said euro zone cohesion is in danger (Photo: EUobserver)

Soaring public deficits in euro countries such as Greece weaken the credibility and "endanger" the cohesion of the common currency, according to a leaked European Commission paper. Meanwhile, the Greek finance minister has rejected speculation that his country might leave the eurozone.

Growing imbalances between countries within the common currency are a "matter of serious concern for the eurozone as a whole," a paper drafted by the commission's economic and financial unit for the EU's finance ministers and obtained by German paper Der Spiegel says.

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These imbalances "can weaken confidence in the euro and endanger the cohesion of the monetary union," it warns.

In particular, Brussels' experts are worried about countries with soaring public deficits: Greece, Ireland and Spain.

"The combination between lagging competitiveness and excessive increase of state debt is worrying in this context," the document reads.

European officials and some member states, particularly Germany, have grown impatient with Greece after the bloc's statistics office found that economic data provided by Athens had been embellished.

The Der Spiegel leak came on top of other harsh words for Greece over the weekend.

"Never again shall we accept deficit data which doesn't correspond to reality," European Central Bank (ECB) chief Jean-Claude Trichet told Focus magazine.

"Those who don't stick to the rules, act irresponsibly and without solidarity, damaging the euro," ECB chief economist Jurgen Stark said in Welt am Sonntag.

Mr Stark added that the problems were not solely linked to budget deficits. "Countries such as Greece need a radical re-orientation of their economic policies," he argued.

The EU has no plans to help Greece out financially, however, with another ECB official, Jose Manuel Gonzalez-Paramo, calling rumours that the bloc could fund a credit-line for Greece "absurd."

Back in Athens, Greek finance minister Giorgos Papakonstantinou told Die Welt that he strongly opposes any talk of his country leaving the eurozone. "Speculations about an exit from the monetary union are absurd. I completely reject the idea that Greece will quit the eurozone," he said.

Mr Papakonstantinou remained confident that Athens would manage the colosal task of lowering the deficit.

"We will manage the budget problems on our own. We didn't ask anyone for financial support and we don't expect any external help," he said.

Greece and creditors proclaim 'end of crisis'

After late-night talks, the Eurogroup agreed on a €15bn disbursement and debt relief measures for Greece, while setting out a tight monitoring when the bailout ends in August.

Greek bailout exit takes shape

At a meeting next week, eurozone finance ministers and the IMF are expected to agree on new cash, debt relief measures, and a monitoring mechanism to ensure that Greece can live without international aid for the first time since 2010.

Analysis

Beyond US dispute, EU still aiming at China

On the day it outlined its reaction to US tariffs on steel and aluminium, the EU commission also launched a case against China on property rights - an issue on which EU and US are working hand-in-hand.

Opinion

The risks behind the 'green bond' boom

The EU should not overuse the financial system in order to achieve environmental goals, or it risks the emergence of a green bond bubble which would be detrimental to the financial sector and hinder the achievement of climate targets.

Opinion

Eurozone needs institutional reform

Both the examples of Greece and Italy test the limits of a system with inherent weaknesses that feeds internal gaps, strengthens deficits and debts in the European South, and surpluses in the European North respectively.

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