EU's Rehn on whirlwind visit to debt-hit Greece

(ATHENS) - The European Union's economic supervisor Olli Rehn begins Monday a whirlwind Greek ministry tour to inspect the debt-hit nation's efforts to slash massive debt and deficit that have rattled the euro.

A lineup of senior Greek officials is scheduled to meet Rehn, including Finance Minister George Papaconstantinou, Economy Minister Louka Katseli and Labour Minister Andreas Loverdos, who are all struggling to tame their budgets.

The Greek Socialist government has presented a raft of measures designed to slash state spending, boost tax revenue and combat long-standing fiscal mismanagement.

Greece's deficit is over four times the allowed EU limit at 12.7 percent of gross domestic product.

The Socialist government has pledged to cut the deficit by four percentage points to 8.7 percent this year, but there are widespread concerns that the recession-hit country will fail to meet the target.

If the programme proves insufficient, a meeting of EU finance ministers could demand even harsher corrective action at a meeting on March 16.

Greek news reports on Sunday said the government could announce fresh measures by Wednesday including a two-percent hike in sales tax, additional benefit cuts on civil servants, and possible limits on Christmas and Easter allowances, known in Greece as the "13th wage".

Unions have already staged protests over the austerity measures and the head of the civil servants' union last week warned that a cut on holiday allowances would be a "provocation".

The semi-state Athens News Agency last week reported that an EU and European Central Bank mission to Athens that prepared the ground for Rehn's visit had raised "key objections" to Greek income forecasts.

If the austerity measures fail to bear fruit then additional policies to raise 3.6 billion to 4.8 billion euros (4.0 billion to 6.5 billion dollars) would be necessary, the report cited mission members as saying.

The social unrest feared by investors has pushed up Greece's borrowing costs at a time when it needs over 50 billions in loans this year.

Greece's European Union peers have expressed frustration with Athens for amassing a debt of nearly 300 billion euros (408 billion dollars) despite a steady stream of funding from Brussels for decades.

They have provided political backing but nothing by way of a concrete support mechanism so far.

On Sunday, the head of the eurozone finance ministers said Greece must step up spending cuts as other European taxpayers are not inclined to correct the mismanagement of past Greek governments.

"Greece must step up its efforts to limit its public deficit," Luxembourg Prime Minister Jean-Claude Juncker, head of the eurogroup of ministers that oversee the eurozone, said in a statement to Eleftherotypia daily.

"It must focus on further spending cuts and on ways to increase revenue."

"Greece must understand that taxpayers in Germany, Belgium or Luxembourg are not prepared to correct Greek fiscal policy mistakes," he said.

Luxembourg has expressed readiness to help Greece if asked but "we must first be persuaded that the (Greek) measures are serious," Juncker said.

Greece has come under market pressure as the weak link in the euro after revealing late last year that its public deficit and debt were much worse than initially thought.

The European currency has slipped considerably against the dollar, trading on Friday at around 1.36 dollars compared to 1.45 dollars in December, and last week plunged to a one-year low against the yen.

Greek Prime Minister George Papandreou has said he will use the crisis to remedy chronic waste in public administration.

The PM travels to Berlin on Friday for talks with German chancellor Angela Merkel amid reports of a planned rescue by Germany and France.

On Saturday, Ta Nea newspaper in Athens said Berlin planned to support future Greek bond issues through its state lender KfW, with assistance from France's Caisse des Depots, and provide backing worth up to 22 billion euros.