European ministers told Greece on Tuesday it may need to take further steps to bring a swollen debt under control and calm irrational financial markets, as wage cuts already announced by Athens sparked another strike.
At a European Union meeting, finance ministers from Germany, Austria and Sweden led the charge, with Germany's deputy finance minister saying Greece should mimic Ireland and Latvia, both of which are slashing spending and wages savagely.
We made it clear the ball is in Greece's court, said Joerg Asmussen. Additional measures by Greece are needed.
That, and a statement issued by the ministers after the meeting, suggested clearly that the 30 days they have given Greece to prove itself before reporting back will in any case end with demands for more budget cuts or tax hikes, or both.
Greece is the first country in 11 years of European monetary union to require a political pledge of support as fears over its debt sparked a market attack that has dented the euro and lifted bond yields, making debt servicing even more challenging.
The ministers said nothing of specific support measures or aid, opting instead to heap pressure on Greece in return for the promise to support it if things get out of hand, a pledge made by European leaders last Thursday.
The pressure on Greece to consider further measures by March 16 has clearly increased, Austrian Finance Minister Josef Proell said, adding no support measures had been agreed so far.
March 16 is a deadline the finance ministers set both for Greece to show its plan is being rolled out effectively and for them to decide what should happen next as they seek to sort out Athens' woes and prevent any broader shutout in debt markets.
Greece will then have to report back again in mid-May and every three months thereafter. Germany's Asmussen and others suggested the International Monetary Fund's advice, but not its money, would be needed too to help Athens meet the challenge.
European Monetary Affairs Commissioner Olli Rehn said that experts from the European Commission, IMF and European Central Bank will be on the ground in Athens in the coming days to check up on implementation of steps announced so far.
With two lots of sovereign debt of more than 8 billion euros each to refinance on the markets in April and May, Athens is on the frontline, and markets also have other euro zone countries such as Spain and Portugal in their sights.
Greek Finance Minister George Papaconstantinou, who said on Monday his government would need more than a day to turn the Titanic, said his country was perhaps an easy target but that the support pledge should serve as a deterrent.
Today it is Greece, tomorrow it can be another country, he said.
Luxembourg's Jean-Claude Juncker also vented frustration at markets, where governments turn to raise or refinance debt via bond issues on a regular basis, so far with success.
We shouldn't accept to be the target of financial markets, said Juncker. I am concerned by this irrational way of behaving of financial markets.
But he too said the ball was in Athens' court, as did the official end-of-meeting statement from Brussels.
To the extent that a number of risks, associated with the specified deficit and debt ceilings materialize, Greece shall announce, in the report to be presented by 16 March 2010, additional measures to ensure that the 2010 budgetary target is met, said the statement.
Meanwhile in Athens, Greek customs officials kicked off a three-day strike to protest against cuts in their income, in a further sign of discontent over cutbacks.
Athens has announced fuel tax increases, cuts in public pay and pension reforms as it strives to deliver on a commitment to reduce its public deficit from 12.7 percent of GDP to less than three percent in 2012, starting with a four-point cut this year.
Part of its battle is one of credibility after years of official statistical reporting on its finances that Swedish Finance Minister Anders Borg has called basically fraudulent.
What we have seen so far is not enough. We need more steps when it comes to taxes and ... expenditure, if they want to build credibility in the market, Borg said on Tuesday.
Markets appeared relatively unperturbed by the developments. The extra interest investors demand for holding Greek debt rather than German bonds rose by almost a third of a percentage point at one stage on Tuesday to 3.35 percent, its highest in a week but later shrank back to below 3.20.
(Additional reporting by Ilone Wissenbach, Tamora Vidaillet, Luke Baker and Julien Toyer; writing by Brian Love, editing by Mike Peacock)