Struggling Greece must not expect EU bailout - ECB

Greece, struggling with a double-digit public deficit, cannot expect the European Union to "save" it, the European Central Bank's chief economist said in an interview published yesterday.

"Greece's problems are decidedly Greek, as Prime Minister George Papandreou has himself admitted," Juergen Stark told the Italian financial daily Il Sole 24 Ore.

"The markets are fooling themselves if they think that at some point the other EU member states will put their hands in their pockets to save Greece," he said.

He spoke as officials from the ECB and from the European Commission began a mission in Athens to examine with Greek officials a crisis programme to stabilise national Greek finances which the Greek government is to submit to the EU Commission by the end of January.

Greece's deficit, the difference between spending on central, welfare and local government budgets and revenues, is estimated to be 12.7 per cent of gross domestic product.

A finance ministry source said on Tuesday, the day before the EU and ECB mission began work, that Athens had reduced by a year its timetable for reducing its public deficit to the maximum ceiling permitted under the Stability and Growth Pact of three per cent of GDP. This would now be achieved within three years.

Late last month Greece was hit by a financial crisis that has fuelled debate in financial circles about the cohesion of the 16-nation eurozone.

Credit rating agencies downgraded their ratings of Greek debt, the price of government debt bonds used to finance the debt fell and the interest demanded by lenders rose sharply.

In addition, the ECB, which manages eurozone monetary policy, and the European Commission put intense pressure on Greece to produce a revised budget to correct public finances and restore national credibility on financial markets.

"Participation in the Monetary Union doesn't confer any right for a member state to demand financial support," Mr Stark said.

"These past few years (Greece) has not kept its public accounts under control or worked to improve its competitiveness," he said.

"These problems are not tied to the global crisis, but are home grown, and must be addressed with appropriate economic measures," he added.