EU shames its major powers over debts

BRUSSELS: The European Union Wednesday (Thursday in Manila) accused its major powers of running away from bulging government deficits, as Greece said it could still seek IMF help if European backing did not ease its debt crisis.

Germany meanwhile warned that repeat eurozone offenders deserved expulsion from the bloc.

EU budgetary watchdogs attacked overly “optimistic” growth assumptions masking bloated national budgets, with Britain firmly in the firing line over “uncertainty” in its spending plans.

Britain, France, Germany, Italy and Spain were among the nations likely to fall short of reduction targets, as were most of the 14 EU nations whose fiscal health was under scrutiny, the European Commission said.

Its charges against Britain stirred tempers in London, amid frenzied if unofficial general election campaigning.

Germany, accused of having a budget strategy that was “not sufficient to bring the debt ratio back on a downward path,” had earlier raised tensions among the 16 nations in the eurozone.

Daggers are already drawn over the need to craft immediate contingency bailout rules because of financial chaos in Athens and fears for others including Portugal.

German Chancellor Angela Merkel warned that Europe needs “a treaty framework in which it would even be possible as a last resort to exclude a country from the euro if it again and again breaks the conditions over the long-term.”

A firm EU line toward Greece appeared to be working, with the interest Athens has to pay to borrow falling to close to 6.0 percent, about a whole point lower than two weeks ago.

Financial woes

But Greek Prime Minister George Papandreou said he could not rule out an appeal to the IMF, if European backing was insufficient to help it out of its financial woes.

“If we realize that we indeed will be borrowing at extremely high rates . . . there are other options,” Papandreou told reporters in Brussels.

“Nothing is excluded,” Papandreou said having been asked whether seeking recourse to the International Monetary Fund remained a live threat.

Britain’s deficit level, at 12.7 percent of Gross Domestic Product or national output, is as high as that of Greece.

Prime Minister Gordon Brown’s government has pushed back spending curbs in the run-up to an election expected in early May.

Finance Minister Alistair Darling on Tuesday (Wednesday in Manila) described recommendations under the assessment, which had been leaked to British media, as “absolute madness.”

Darling told reporters in Brussels that the commission’s suggestion of faster debt repayments would be like taking “just over 25 billion pounds [28 billion euros or $38 billion] out of the economy.”

Britain’s state borrowing is expected to balloon to a record 178 billion pounds in the 2009/10 financial year, hit by multibillion-pound banking bailouts and weak taxation revenues.

EU finance ministers will study the commission’s recommendations when they meet next month in Madrid.

Speaking in the European parlia-ment just after they were revealed, the IMF’s managing director, France’s Dominique Strauss-Kahn, said that countries should act now.

The others assessed were Austria, Belgium, Finland, Ireland, The Netherlands and Slovakia. –AFP