EU finance ministers ready to act in Greek crisis to protect euro

EUROZONE finance chiefs signalled yesterday that they were prepared to centralise national economies in a landmark decision to save Greece.

The move appears to confirm the fears of those who warn that entering the euro would result in national governments losing control of their economies.

And there were hints last night that the four weakest economies, dubbed the Pigs – Portugal, Italy, Greece and Spain – might all see greater intervention from the European Union.

At a meeting in Brussels, finance ministers from the 16 euro countries, supported by the IMF, announced that they would be introducing tighter monitoring measures to stop the Greek crisis bringing the currency down.

In doing so, the two major euro economies – France and Germany – announced they would stand behind Greece to help guarantee its debt and prevent an economic crisis.

Greece had been stuck between economic meltdown and potential anarchy as millions protested against the austerity measures which were being brought in by the government to tackle the national debt.

Cuts of 10 per cent in public-sector wages and adding ten years on to many people's retirement age were among the proposals.

But after an EU summit pledge yesterday to help Greece over its public debt crisis "if needed", EU economic and monetary affairs commissioner Olli Rehn welcomed what he called the "determined and co-ordinated" response from Europe's leaders.

However, while the summit declaration did little to boost the euro's credibility rating on world markets, the commission hoped the latest moves to avoid a repeat of the Greek debt wobble would help.

"The critical lesson from this crisis is that we urgently need deeper and broader surveillance of economic policies, including earlier detection and tackling of imbalances, in order to better safeguard the macro-financial stability of the euro area," said Mr Rehn. "The commission will soon come forward with proposals to further strengthen the co-ordination and the surveillance of national economic policies within the euro area."

He said the 16 eurozone countries had a shared responsibility for the euro's stability, adding: "Our economic policies are a matter of common concern."

Tougher economic surveillance to prevent a eurozone member suffering Greek-scale debt and deficit problems again will be discussed by EU finance ministers at talks next week.

Chancellor Alistair Darling is likely to attend the meeting, but will take no part in "eurozone" discussions – standard practice for an EU country that does not use the single currency.

Yesterday, in a keynote speech in Edinburgh, Mr Darling claimed he had saved the UK from entering a full-scale depression.

Greece did not ask for a bailout at yesterday's summit, but prime minister George Papandreou agreed to reduce its budget deficit by 4 per cent this year from its current 12.7 per cent of GDP.

However, after the summit Mr Papandreou criticised the EU.

He said: "Greece is not a superpower to fight this battle alone. In the last few months of this crisis, the EU gave its political support. But in the battle against the psychology of the market, it was at the very least timid."