Get ready for tougher cuts, Greece told

BRUSSELS - European finance ministers told Greece yesterday to prepare even tougher spending cuts and new taxes, including a tax on luxury goods and cars, to fix its debt crisis.

The 16 countries that use the euro warn that Greece will need to take the extra measures if current cutbacks don't bring its massive deficit down from 12.7 per cent of economic output to 8.7 per cent this year.

Greece has until March 16 to report back on its progress.

Eurozone nations have pledged to help Greece if it can't repay its debts - but want Greece to make big spending cuts first. They are taking action because fears of a Greek default have threatened to spark a wider European debt crisis, undermining the euro and leading to serious questioning of rules underpinning the shared currency.

Luxembourg Prime Minister Jean-Claude Juncker, who led the talks, said Greece had agreed to take further action if it looks like it can't hit the target.

All eurozone finance ministers - except Greece - would vote on whether such action was needed and "would impose on Greece" extra measures, he said.

The details of new spending cuts would then be agreed with the European Commission and would focus on raising value-added tax, setting new excise duties on luxury goods - including private cars - and new cuts to capital expenditure.

Juncker said Greece's debt crisis was "first and foremost a Greek problem and an internal Greek problem".

But if Greece's budget plans and extra action does not slash the budget deficit, he said the eurozone would step in and "will take determined and co-ordinated measures to safeguard the stability of the eurozone as a whole," he said, repeating a statement from EU leaders last week.

He refused to give details about how the eurozone would come to Greece's rescue if it comes to that.

- AP