EU concerned of contagion from Greek fiscal crisis

(STRASBOURG) - The European Commission voiced concern Thursday that Greece's fiscal crisis poses a "serious risk of spillover" into other parts of the 16-nation eurozone.

"The commission is concerned about the substantial economic and fiscal challenges that Greece faces," EU Economic Affairs Commissioner Joaquin Almunia told the European Parliament in Strasbourg.

Greece's woes are a "matter of common concern for the eurozone and the EU as a whole," he added, stressing that serious and persistent internal and external imbalance "threatens stability" in the country.

This in turn presents a "serious risk of spillover into other parts of the euro area," Almunia added.

The spreads between lending rate from one eurozone country to another demonstrate the clear risks of contagion, he added.

The 27 EU heads of state and government will meet in Brussels on Thursday for a crisis summit, with the Greek budget crisis to the fore if not explicitly on the agenda.

Greece's under-fire Socialist government is struggling to slash a debt mountain expected to hit over 290 billion euros (396 billion dollars) this year.

The Greek labour minister said Tuesday he would raise the average rate of retirement by two years to 63 by 2015 as part of a spate of measures to clean up its loss-making public sector.

The moves are aimed at taming the country's massive debt and a runaway public deficit of 12.7 percent, which have shaken the euro and put pressure on Greek sovereign bonds.