Greek Finance Problem affects EURO

The EU summit was grappling with a Greek financial crisis which threatens the euro and risks destabilising other economies.

Athens is already facing possible sanctions from Brussels for running a deficit way above the 3% maximum of GDP permitted under the eurozone stability rules.

But the true scale of the problem is worse than expected - at nearly 13%.
Greek government debt is also off the eurozone scale at well over 100% of GDP - compared with the maximum permitted debt ceiling of 60%.

Summit host Fredrik Reinfeldt, the Swedish prime minister, has put the issue on the Brussels summit agenda at the last moment, with German Chancellor Angela Merkel insisting that all EU leaders must "share responsibility" for the Greek situation.
But there was little sign of the hat being passed around the summit table for cash contributions towards a Greek bail-out.

"The economic situation in Greece is serious, for sure", said one EU official, "but it cannot be resolved by financial pledges at this summit. We already have mechanisms and targets in the eurozone for limiting public deficits and Government debt, and Greece is not the only country by a long way which has fallen significantly outside those margins."

Far from being bailed out, Greek prime minister George Papandreou might come under attack for his treasury's failure to reveal the scale of the crisis. Earlier this year the European Commission was caught unawares when it calculated a Greek deficit outside the 3% limit - but nothing like the 12.7% figure which was revealed when Athens issued a "revised projection".

Mr Karamanlis will tell his summit colleagues what his government said on Wednesday - that there will be drastic action to cut spending and restore stability. If not, the Commission could theoretically impose hefty financial penalties on the Greek government.

However, that is unlikely, as one Commission official suggested: "The problem we have faced in the past is that if you slap big fines on countries struggling with debt, you get accused of simply making matters worse."

Source: google.com