ECOFIN: Two EU Fin Mins Suggest Greece Won't Get Bailout

ECOFIN: Two EU Fin Mins Suggest Greece Won't Get Bailout

By Adam Cohen

Of DOW JONES NEWSWIRES

BRUSSELS -(Dow Jones)- Greece has to comply with the European Union's budget rules, finance ministers from two euro-zone countries said Monday, suggesting the troubled country won't receive financial help from its neighbors.

Greece's budget deficit, estimated at close to 13% of gross domestic product last year, has sparked fears that the country could default on its debt. Ratings agencies have downgraded the country's sovereign bonds and the cost of insuring Greek government debt against a default has hit record highs.

But two euro-zone finance ministers said the country must solve its debt problems without outside help. Under EU rules, governments must keep their budget deficits below 3% of GDP.

"I think the Greeks are very much aware of how serious the situation is and I think they are aware that they need to solve their problems themselves," Dutch Finance Minister Wouter Bos told journalists as he walked into the regular monthly meeting of euro-zone finance ministers.

German Finance Minister Wolfgang Schaeuble told journalists that Greece has to take the "necessary measures" to trim its deficit.

"A new Greek government has taken office and it must fulfill a difficult task," Schaeuble said.

The ministers from the 16-state currency area are expected to hold lengthy talks on Greece's budget problems and flaws in the country's statistics.

They also will discuss candidates to replace European Central Bank Vice President Lucas Papademos, whose term expires at the end of May. Luxembourg's Prime Minister Jean-Claude Juncker, who currently chairs the euro-zone ministers' meetings, known as the Eurogroup, is expected to win unanimous support among the finance ministers for another two-and-a-half-year term.

Juncker is among the EU officials who have long-dismissed speculation that Greek could default on its debt or be forced to leave the euro-zone. ECB President Jean-Claude Trichet on Thursday said the country quitting the euro was "an absurd hypothesis." Greek President George Papandreou insists there is "no chance" the country will exit the euro zone.

EU finance ministers and commission officials have avoided outlining plans for a worst-case scenario, saying only that no euro-zone country risks defaulting on its debt obligations. Last spring, when Greek government bond spreads widened sharply, European Commissioner for Economic and Monetary Affairs Joaquin Almunia said the bloc had a plan for a worst-case scenario, but he has never discussed the details of this scheme.

EU countries can seek help from the International Monetary Fund, but have to approach the European Commission for help first. EU diplomats say the ECB wants to avoid IMF aid for Greece, which might be seen as a sign of broader weakness in the currency area.

Greece on Thursday drafted a budget aimed at bringing its deficit below 3% of GDP in 2012. The Greek government also says it does not want and will not need external help to pay its debts.

Following the announcement of the Greek budget, the cost of insuring Greek sovereign debt against default hit a record high, reflecting fading confidence in the country's ability to fix its public finances.

"I understand why the markets are worried about Greece," Bos said, noting that he is confident the Greek government will make the needed deficit cuts to regain investors' trust.

-By Adam Cohen, Dow Jones Newswires; +322 741 1486; adam.cohen@dowjones.com

(Andrea Thomas and Gabriele Parussini contributed to this article.)

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(END) Dow Jones Newswires

January 18, 2010 12:10 ET (17:10 GMT)


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