Greece does not face any bankruptcy risks, though the situation in the economy is worrying, Eurozone Finance Ministers said on Tuesday. They also noted that the Dubai debt crisis is unlikely to have a major impact on Eurozone banking system.
"Greece is not and will not be in the situation of bankruptcy," Eurogroup Chairman and Luxembourg Prime Minister Jean-Claude Juncker said. "The situation in Greece is rather worrying."
In a meeting held on Tuesday in Brussels, Eurozone finance ministers asked the Greek government to cut fiscal spending from its 2010 national budget to reduce the budget deficit. For 2009, Greece set a budget deficit target of 12.7% of GDP after October 4 elections. That was much higher than the 3.7% of GDP estimated earlier. The shortfall was then planned to be cut to 9.1% in 2010.
The European Union in November criticized Greece for not taking effective actions to reduce budget deficit. The European Commission expects Greece's public debt to rise 124.9% of GDP in 2010, the highest among Eurozone nations. Ministers said Greece would be given a new deadline in February to cut its budget deficit below the EU's ceiling of 3% of GDP, meaning the country is unlikely to met its current deadline of 2010.
On the Dubai debt crisis, Juncker said problems there would have only minor impacts on Eurozone due to the very limited exposure of its banking system. "The events in Dubai are not going to stop the euro zone returning to growth," he added.
Finnish Finance Minister Jyrki Katainen said so far issues in Dubai do not pose serious risks to Eurozone. German Finance Minister Wolfgang Schaeuble said the Dubai problem shows that the financial crisis is not over. Impacts would be regional, said French Economy Minister Christine Lagarde.
Elsewhere, Swedish Finance Minister Anders Borg also held the view that European banks have less exposures to Dubai, but urged careful monitoring of developments. Borg is set to chair the Ecofin meeting today.
Referring to Eurozone in general, Juncker said 2010 is not the year when Eurozone policymakers should start withdrawing budget and fiscal stimulus. Further, he said Eurozone finance ministers and the International Monetary Fund agree that the euro is overvalued.
On China, Eurozone finance ministers said they would like to see an orderly and gradual appreciation of the Chinese yuan against the euro. "We do not want to see any abrupt about-turn in Chinese monetary policy, but we would like to see a gradual and orderly appreciation of the yuan against the euro," Juncker said.
Moreover, he said, "We thought that the appreciation of the renminbi was in the interest not only of us in Europe but also of the Chinese people. Our Chinese friends do not see things in quite the same way, no surprises."
In the meeting, Juncker declared that he will continue heading the Eurogroup. His next term will start on January 2010 and end in June 2012. Other finance ministers voiced their support for Juncker. Also, there were discussions on filling the vacancy of European Central Bank Vice President post when the incumbent Lucas Papademos leaves office in mid 2010, when his term ends.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.