Greece rules out quitting euro zone

‘Severe irregularities’

The IMF mission will provide technical assistance and advice on areas including how to create a new taxation system, budget management and pension reform. 

The mission follows a visit by experts from the European Commission, the EU executive, and European Central Bank (ECB) last week, to examine Greece’s public finances. 

The European Union experts released their report on the visit on Wednesday in which they highlighted “severe irregularities” in the country’s accounting procedures.

Eurostat, the EU’s statistical office, criticised the fact that Greece had revised its public budget deficit last year from 3.7 per cent of total output (GDP) to 12.7 per cent and said political interference meant the country’s data was not reliable.

The report raised fears that the crisis could worsen and increased the possibility of the EU executive launching infringement proceedings against Greece. 

Austerity measures

Last month, Greece saw its credit rating downgraded by all three major rating agencies and is under pressure from the EU to cut its budget deficit. 

Both the ECB and the Spanish presidency of the EU have warned Greece that it should not expect a bailout from the bloc and have put pressure on Athens to put its public finances in order. 

Speaking in Athens during a visit on Tuesday, Herman van Rompuy, the EU’s new president, said he had confidence in Greece’s efforts to handle the issue.

Greece’s revised public deficit of 12.7 per cent is far above the EU’s accepted limit of three per cent and concerns over the country’s financial stability have already shaken the euro, the EU’s common currency.

Over the next few weeks, the Greek government will present an austerity plan for analysis by the EU’s executive.

Higher taxes

“It is essential that the Greek government presents shortly, in the next few weeks if not in the next few days, a comprehensive  package of policy measures” to correct the situation, said Olli Rehn, the European commissioner-designate for economic and monetary affairs, during a three-hour grilling in front of the European parliament in Brussels on Tuesday. 
 
The Greek government has said it will get the deficit down to 8.7 per cent in 2010 by cutting spending and fighting tax invasion. 

It aims to bring it to below the three per cent limit imposed by the eurozone by 2012. 

In an effort to cut the rising deficit and shore up public  finances, the government has announced a freeze on public sector pay for those earning more than $2,900 a month. 

Last week it announced a 20 per cent increase in tobacco and alcohol taxes and a higher inheritance tax. 

In reaction to the government’s measures, the Greek civil servants’ union ADEDY has called a one-day strike for February 10.