Greece faced down pressure for deeper budget cuts at euro zone talks on Monday and warned that last week's support pledge by European leaders may not suffice to stop the debt market squeeze on governments in the region.
Greece last Thursday became the first country in 11 years of European monetary union to require such a pledge after mounting concern about its ability to service a bloated debt sparked a market frenzy that drove bond yields up and the euro down.
Greek Finance Minister George Papaconstantinou defended his government's plans to slash the public deficit from 12.7 per cent of gross domestic product to less than 3 per cent by 2012, starting with a four-point cut in 2010.
"We're trying to change the course of the Titanic, it cannot be done in a day," Mr. Papaconstantinou told reporters as he headed into talks with other euro zone finance ministers in Brussels.
"If additional fiscal measures are needed, we will take them. Today it is Greece, tomorrow it can be another country. Any European country can be prey to speculative forces."
Greece faces some major hurdles soon, with two lots of more than 8 billion euros of government bonds to refinance in April and in May.
Markets had hoped at a point last week that the ministers meeting in Brussels would flesh out the political pledges from leaders to discuss actual financial aid, but sources said that the focus would remain on getting Greece to do its part.
Mr. Papaconstantinou said that urging Greece to do more right now and before its reports back on progress in March was too much to ask, and suggested ministers should try to develop on the pledges leaders made last week.
"If we announce new [Greek fiscal]measures today, will that stop markets attacking Greece?" he said.
"My guess is what will stop markets attacking Greece is a further, more explicit message that makes operational what has been decided last Thursday at the European Council [summit]"
The minister was also forced to explain media reports that Greece used derivatives contracts concocted by Wall Street banks in the past to lower its reported debts. He said such contracts were legal at the time and were no longer used.
Finnish Finance Minister Jyrki Katainen said any help for Greece would have to be bilateral rather than pan-European, and added: "The only country that can help Greece is Greece itself."
"We are listening to what the Greek government has to say, that is why we are here," said German Finance Minister Wolfgang Schaueble, whose government has to contend with opinion polls showing a majority of Germanys believe Greece should be thrown out of the euro zone.
"We will look at the additional measures and evaluate them."
European Monetary Affairs Commissioner Olli Rehn said ministers backed Greece's three-year plan and this year's target of a four percentage-point cut in the deficit -- to 8.7 per cent of GDP -- but that it might be hard to achieve.
"We expect that in due course the Greek government will take necessary additional measures to reach that target. Our view is that risks related to the implementation and macro-economy and markets are materializing," Mr. Rehn said. "And therefore there is a clear case for additional measures."
Greece confirmed last week it stayed in recession in the last quarter of 2009. The euro zone as a whole barely grew as German economic growth halted and Italy and Spain also registered drops in GDP, making both deficit reduction and the provision of aid politically more challenging.
Jean-Claude Juncker, chairing Monday's talks, echoed Mr. Rehn's remarks and noted that European leaders had pledged support at a summit last Thursday on the condition that Greece stuck firmly to viable plans to fix its finances.
"We will have a discussion on the basis of what the European Council (summit) agreed upon," said Mr. Juncker, who is Luxembourg prime minister and chairman of the Eurogroup forum where ministers confer regularly on pan-European matters.
"It is clearly mentioned that Greece has to make sure that it cuts it budget deficit for 2010 by four per cent and we have to check if this is possible or not and it will all depend on the answers given to that crucial question," he said.
Asked if there would be a rescue plan for Greece: Mr. Juncker said: "This depends on how far Greece agrees to additional measures in case those are warranted."
Asked if Luxembourg would offer such help, he said "yes".
EU leaders hope that the pressure and a concerted effort by Athens will be enough to knock the country's public finance into shape and tame market fears that Greece will be unable to control or service its debt, one of Europe's biggest.
Although leaders said little of how they may help, they have said they are ready to take "determined and co-ordinated" action to safeguard financial stability in the euro area if needed.
The premium investors demand to hold 10-year Greek government bonds rather than benchmark German Bunds rose to 302 basis points on Monday, from 275 bps late on Thursday, and the euro was trading down at 1.3610 to the U.S. dollar.
Concerned about how the market is exploiting Greece's weakness, and by extension that of the euro, euro zone finance ministers could also discuss measures to restrict short-selling of Greek debt via credit default swaps, one source said.
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