Greece taking steps to meet fiscal challenges: Van Rompuy

(ATHENS) - Greece is now taking steps to meet the "substantial" challenge posed by its huge debt and public deficit, the European Union's new permanent president said on Tuesday.

"Greece faces very substantial economic and fiscal challenges and it is a matter of common interest for the European Union as a whole and more particularly for the members of the eurozone that Greece manages to meet those challenges," Herman Van Rompuy told reporters during a visit to Athens.

Greece, which is mired in recession, has a public spending deficit that rose to 12.7 percent of output last year, far above the 3.0 percent ceiling permitted to countries sharing the euro currency.

It is also saddled with a debt constituting 113 percent of gross domestic product (GDP).

"After our discussion I am confident that the Greek government is already taking the necessary further steps to address the situation," the EU chief said after meeting with Greek Prime Minister George Papandreou.

"Resolute fiscal consolidation should start without delay in 2010 and the deficit should be brought below three percent by the end of 2012," he said.

"This commitment needs to be supported by concrete and credible measures with a front-loading of the effort," he added.

Greek Finance Minister George Papaconstantinou said in an interview with the German newspaper Handelsblatt to appear Wednesday that his government had carried out a thorough re-examination of its finances.

"There is no skeleton in the closet," he told the paper.

"We have re-calculated everything again, taking into account hospital debt, higher costs and a decline in receipts last year. It's a solid basis for reducing the deficit in the years to come."

The recently elected Socialist government, which must present its crisis plans to the EU executive commission by the end of the month, has said it will get the deficit down to 8.7 percent in 2010 by cutting state spending and fighting tax fraud.

It aims to bring it to below 3.0 percent of GDP, the limit imposed by the eurozone, in 2012.

The government has invited a team of International Monetary Fund experts, scheduled to arrive on Wednesday, on a week-long visit to lend technical advice on pension reform, tax policy and budget management.

European finance ministers and European Central Bank officials have criticised Athens in past weeks for its failure to control its wayward finances and the three main credit rating agencies have all downgraded the country's sovereign debt standing.