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Greece: Eurogroup May Demand Additional Fiscal Measures

Monday, February 22, 2010

Greece is to implement additional budgetary measures and to introduce new taxes if the government’s recently announced austerity programme proves insufficient in combating the country’s economic crisis, European Union finance ministers have warned. Due to report on progress on March 16, Greece’s aim is to reduce its deficit, currently at 12.7% of gross domestic product, to 8.7% this year.

Luxembourg’s Prime Minister and President of the Eurogroup, Jean-Claude Juncker, has confirmed the Greek government’s intention to take additional measures, should it fail to meet its fixed objectives.

According to Juncker, Eurozone finance ministers will vote to determine whether or not further action is required, and will impose new measures on Greece if they deem that the current course of action is proving inadequate. Additional measures, to be approved by the European Commission, are thought to include a rise in value-added tax, the introduction of new taxes levied on luxury products, including private cars, and cuts in spending on investment.

Eager to emphasize that the Greek crisis is first and foremost a national problem, Juncker nevertheless underlined the Eurozone’s commitment to supporting Greece and to taking coordinated action in order to preserve the stability of the Eurozone, if the budgetary plan and additional fiscal measures fail to reduce the budget deficit.

French Finance Minister Christine Lagarde has reiterated that Greece will not be abandoned, although she has emphasized that Greece must demonstrate, on an ongoing basis, that it is taking the necessary measures to achieve its goals.