Greek, Irish debt woes

The Greek public deficit has fallen sharply since the implementation of an EU-IMF rescue package for the debt-stricken country, but efforts to reduce the shortfall have still fallen short of the targets set for this year.

Greece, struggling with a huge public deficit, came close to default in May and had to be bailed out with a 110-billion-euro package arranged by the EU and International Monetary Fund. Through October, Greek public finances showed a deficit of some 17.4 billion euros ($24 billion), down 30 percent from the same period a year ago, but still less than the 32 percent target.

The government in Athens has implemented a series of draconian reforms aimed at restoring its financial credibility. It cut spending by 7 percent, or four billion euros, but tax revenues only grew 3.7 percent, well short of the 2010 target of 13.7 percent.

At the same time as this announcement, the European Union moved to reassure financial markets on Thursday that it was ready to support Ireland as the eurozone country's debt woes made waves at the G20 summit in South Korea.

Ireland has worst deficit in Europe

Concern about Ireland is growing after Irish bond yields soared to a record level of 8.28 percent on Wednesday. As a result, European Commission President Jose Manuel Barroso found himself compelled to announce that the EU stood ready to help Ireland "in case of need."

"What is important now is that we have all the necessary instruments in place," Barroso said in the South Korean capital, Seoul, ahead of the G20 meeting. "We are monitoring the situation in Ireland on a permanent basis," he added.

The rise in Irish bond yields has unsettled investors and put the entire European bond market under serious strain.

Ireland is trying to tackle the worst budget deficit in the EU and convince markets that it does not need a Greek-style bailout.

Author: Gregg Benzow (dpa, AP, AFP, Reuters)
Editor: Rob Turner