Greek deficit ‘endangers’ euro, EU commission says

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.

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

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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.