Strike-hit Greece faces EU budget test

(ATHENS) - European Union and IMF experts on Thursday were finalising a report on Greece's crisis-hit finances as the embattled Socialist government digested the impact of a general strike against its austerity cuts.

Tens of thousands of people took to the streets of major Greek cities on Wednesday to protest tax hikes and benefit cuts in the first general strike to hit the government, which is grappling with spiralling debt levels.

But the main question according to analysts is whether the majority of Greeks, who currently appear to accept the painful adjustment, will continue to support extra measures that are widely perceived to be imposed from Brussels.

"The real question is whether the pro-European spirit of Greeks will falter before the flurry of orders from Brussels," said Thomas Gerakis, head of the Marc polling company.

For the moment, "Greeks remain convinced that the situation is very difficult. They got up from their armchairs and realised that they are on the deck of a sinking ship," he told AFP.

As the country with the highest public deficit in the eurozone, Greece is at the centre of a storm over spiralling debt levels in Europe that has threatened cohesion in the European singe currency area.

After a collapse in investor confidence, Greece faces major strains in raising new money on international markets and is under intense pressure from EU authorites to get its public finances back in order.

The report of the three-man mission from the EU, European Central Bank and International Monetary Fund mission, which completed on Wednesday a round of talks with Greek officials, comes as a new hurdle for Athens.

If the experts say the programme is not enough, a meeting of EU finance ministers could demand even harsher corrective action at a meeting on March 16.

Before that meeting, the EU Financial Affairs Commissioner Olli Rehn is also due to visit Athens.

The experts met Finance Minister George Papaconstantinou and Economy Minister Louka Katselli just as the country was hit by a nationwide strike, including a strike by journalists, against austerity measures.

Also late on Wednesday, Standard & Poor's credit rating agency warned that it could downgrade Greek sovereign debt again within a month.

The yield on Greek ten-year bonds on Thursday rose to 6.598 percent compared to 6.496 percent a day previously.

Under pressure from financial markets and EU institutions and partners, Greece has promised a programme to cut public spending and crimp public sector pay, to raise taxes and fight tax evasion, and to restructure its economy.

The baseline target is to cut back an annual public deficit by four percentage points of gross domestic product to 8.7 percent this year.

This is widely considered to be an enormous undertaking particularly since credit rating agency Moody's has calculated that Greece will have to use 15.1 percent of its tax revenues this year to meet debt interest payments due.

That is about twice the ratio in other debt-stricken eurozone countries Spain and Portugal.

The last EU summit on February 11 decided to send three-way EU, ECB and IMF missions to Athens regularly under a special arrangement of exceptionally close supervision of Greek public finances.