Greece Faces EU Deadlines on Debt and Swaps

BY Carolyn O'Hara  February 16, 2010 at 10:52 AM EST

EU finance ministers have given Greece a one month deadline to demonstrate that it is making dramatic cuts to its budget, and just days to provide more information on the country’s use of currency swaps to potentially hide growing debt, as has been reported in both Der Spiegel and the New York Times in recent days.

Greece has until March 16 to show that it is making serious progress in cutting its 2010 budget deficit by 4 percent of GDP — from 12.7 percent to 8.7 percent — and that it is on the road to achieving a deficit below 3 percent of GDP by 2012, according to a statement released by EU finance ministers Tuesday. If Greece has not made significant progress by mid-March, EU officials have suggested they will demand spending cuts and new taxes be imposed.

The statement Tuesday essentially delays an EU bailout decision, a move that is reportedly become more politically unpalatable in countries such as Germany. Giving Greece several weeks both shifts some pressure onto Athens and provides more time for the rest of the eurozone to plot its course to tackle the most severe threat to the common currency since it was adopted.

EU finance ministers also gave Greek officials until Friday to provide more information on the extent to which currency swaps and other complex financial instruments were used to mask the severity of the country’s growing debt. Both the New York Times and Germany’s Der Spiegel have reported in recent days that Goldman Sachs and other Wall Street firms offered Greece financial products and strategies that allowed the government to borrow and spend at rates that far exceeded the EU’s deficit rules.

“If confirmed that some investment banks have been involved in these kinds of exercises, we have to see whether to do something in respect to it,” European Commissioner for Economic and Monetary Affairs Olli Rehn Rehn told reporters Tuesday, according to the Wall Street Journal.

We’ll have more on the European debt crisis on Tuesday’s NewsHour.