Greece faces big challenges in 2010: minister

Athens, December 31 (MIA) -  The debt-ridden Greek economy will confront major challenges next year, the finance minister said Thursday, at the end of a month in which the government's credit standing suffered downgrades from all three rating agencies.

"The year 2010 will be full of challenges," AP quoted Finance Minister George Papaconstantinou as saying after his meeting with Prime Minister George Papandreou.

But he added: "The Greek economy will emerge much stronger."

Greece is struggling with a public debt that approaches 113 percent of gross domestic product, far in excess of the 60 percent stipulated by the eurozone. The government has said the debt in 2010 will likely come to 120 percent of output.

The deficit in public finances this year amounts to 12.7 percent, well above the 3.0 percent eurozone limit.

The country's debt and deficit prospects have caught the critical attention of the three principal ratings agencies, Fitch, Standard & Poor's and Moody's, each of which has lowered Greece's sovereign debt ratings.

The action threatens to make it even more expensive for Greece to borrow money on international markets to meet its obligations.

Papandreou, in power since October, has pledged to rein in spending and combat tax evasion.

Parliament last week adopted a crisis budget for 2010 aimed at bring order to the country's public finances and to restore its badly dented credibility with foreign investors.

The budget foresees a reduction in the public deficit from 12.7 percent to 9.1 percent.

Papandreou called the spending plan "a contract to reconquer our credibility."

"We shall prove our capacity and determination to change this country, to ourselves and to any foreigner who puts in doubt our will."

Greek economic growth is expected to stagnate in 2010 with a drop of 0.3 percent, showing a slight improvement over 2009 when a contraction of 1.2 percent is foreseen.

Public coffers face a major drain from state hospital debts -- estimated at EUR6.3 billion ($9.1 billion) -- and pension funds that are under pressure from Greece's ageing population and widespread social contribution avoidance.

"Unless this course is checked we'll need loans in May to pay pensions and other benefits," deputy labour minister George Koutroumanis told deputies.

The government also plans to borrow up to 53 billion euros in 2010 and expects to fork out EUR12.95 billion -- or 5.3 percent of output -- in interest payments next year to service the debt.

Markets have so far shown little inclination to wait for reforms that successive Greek governments have promised yet failed to implement.

And Greece's European Union peers are also losing patience with Athens, which has revised crucial economic figures twice in the last five years.

"Our credibility deficit is more important than the deficit in our public finances," Papaconstantinou told parliament earlier this month.

"People just don't believe us. 'We've heard the same talk for five years', they say.