Budget hole

Eurogroup chairman Jean-Claude Juncker on Thursday reiterated his conviction that fears over a potential Greek bankruptcy were unfounded.

"I totally exclude a state bankruptcy in Greece," the Luxembourg prime minister said on the sidelines of a meeting of the center-right European People's Party in the German city of Bonn.

Juncker admitted that Greece's budget situation was very tense, but stressed that Athens would be able to pull through without any financial aid from the EU.

He added that the Greek government was planning a host of short- and longterm measures to counter its soaring budget deficit, which is expected to rise to 12.7 percent of output this year amid debts of 113 percent of gross domestic product.

German Chancellor Angela Merkel voiced support for the country. "Other nations also have their problems," she said. "In order to have a factual discussion, I’d request that this not be exaggerated."

ECB concerned

European Central Bank President Jean-Claude Trichet, the custodian of the eurozone's single currency, has also underlined the gravity of the situation and urged the Greek government to tackle the issue head on.

"I am confident that the Greek government will in the near future take the courageous and necessary measures required," he said in an interview in the Belgian economic dailies L'Echo and De Tijd.

Greece's debt stands at 300 billion euros, the highest level in the country’s modern history, an all party crisis meeting convened by Greek Prime Minister George Papandreou was told on Thursday.

The country revealed the previous day that it was working on radical action to reverse the deepening financial crisis which is straining eurozone cohesion.

"Either we eradicate the debt, or the debt will eliminate the country," Papandreou said.

The debate on the precarious state of the Greek economy flared after the international credit ratings Fitch on Tuesday downgraded Greek long term debt ratings from A- to BBB+ in response to the country's huge public deficit.

The announcement not only alarmed investors throughout Europe, with Greek stocks shedding 10 percent in two days, it also raised concerns among EU member states that they would have to prop up Greece in order to stabilize the euro which has suffered over the affair.

Meanwhile eurozone worries are beginning to extend to Ireland and Spain, which have each received warnings from the ratings agencies.

nk/Reuters/AFP
Editor: Trinity Hartman