Germany's tough stance on banks and bond markets sharing the pain of any euro zone sovereign debt default could force some economies toward bankruptcy, Greek prime minister George Papandreou said today.
"It created a spiral of higher interest rates for countries that seemed to be in a difficult position, such as Ireland or Portugal," Mr Papandreou said during a visit to Paris.
"This could create a self-fulfilling prophecy ... This could break backs. This could force economies towards bankruptcy."
The comment came after new European Union figures showed Greek deficit and debt levels were higher than previously estimated suggesting it is unlikely the country will reach targets set out in its bailout agreement.
European Central Bank vice-president Vitor Constancio warned today Greece may have to may have to introduce additional measures to meet its budget targets for next year, .
Greece’s 2009 budget deficit reached 15.4 per cent of gross domestic product, significantly above its previous estimate of a 13.6 per cent deficit, Eurostat said. The Irish deficit stands at 14.4 per cent.
Public debt stood at 126.8 per cent of GDP at the end of last year, higher than that of any other EU state. In April, Eurostat had estimated the figure at 115.1 per cent of GDP.
The revisions are likely to mean Greece will not achieve its initial target of lowering the deficit to 8.1 per cent of GDP by the end of this year.
Mr Constancio said Greece meeting the target for 2011 “may involve certainly new policies which were not asked for or contemplated before”.
“The target for next year should be kept,” he said. “The necessary policies should be adjusted to maintain that target.”
The upward revision of debt and deficit levels was widely expected since Eurostat said there were some issues with the Greek data when it released its previous estimates in April.
The statistics agency said today that all the issues had been addressed.
Agencies