Eurozone gives Greece 30 days to show good on deficit

BRUSSELS (Reuters) - Euro zone states urged Greece on Monday to announce more deficit-control steps by mid-March if needed, but said nothing new of last week's pledge to defend the country if debt market pressures spin out of control.

At talks among finance ministers, Greece asked the euro zone to bear with its fiscal plans as announced, and warned that last week's offer of support by EU leaders may not be enough to stem a debt market squeeze on governments in the region.

Greece is the first country in 11 years of European monetary union to require such a pledge after fears over its bloated debt sparked a market attack that drove bond yields up and the euro down, fuelling government fears of a broader market shutout.

"Financial markets are completely wrong if they think they can destroy Greece," Jean-Claude Juncker, Luxembourg's prime minister and chairman of the finance ministers' meeting in Brussels, told a news conference.

He and others went to lengths to say Greece had 30 days to prove its plans were off to a convincing start and he said that Athens could count on unspecified support if that was not the case and markets refused to give it breathing space.

Greece's Socialist government is fighting an uphill struggle to get its finances in order, restore credibility in other capitals and financial markets alike, and prove that the data it publishes on its economy is no longer what Swedish finance minister Anders Borg described as "basically fraudulent."

"What happened today is a clear reaffirmation of the ambitious, audacious and extremely new Greek plan to address and tackle the issue of excessive deficit," French finance minister Christine Lagarde told reporters.

Greece would have to prove on a day-to-day basis between now and March 16 that it was on track and, if short of the mark, come up with proposals for further measures to meet its target of a four-percentage-point cut in the deficit this year.

"If risks to Greece's deficit targets materialize, then Greece will announce additional steps by mid-March," said European Monetary Affairs Commissioner Olli Rehn.

Greek Finance Minister George Papaconstantinou defended his government's plans to slash the public deficit from 12.7 percent of gross domestic product to less than three percent by 2012, starting with the four-point cut in 2010 that has sparked strikes over civil service pay cuts and planned pension curbs.

"We're trying to change the course of the Titanic, it cannot be done in a day," he said. "If additional fiscal measures are needed, we will take them. Today it is Greece, tomorrow it can be another country. Any European country can be prey to speculative forces."

MAJOR HURDLES AHEAD

In financial markets, where governments go for much of their funding, Greece faces hurdles, with two lots of more than 8 billion euros of government bonds to refinance in April and May.

Papaconstantinou said urging Greece to do more right now made no sense and suggested ministers develop on the pledges of support that leaders made after emergency talks last Thursday.

"If we announce new (Greek fiscal) measures today, will that stop markets attacking Greece?" he asked.

"My guess is what will stop markets attacking Greece is a further, more explicit message that makes operational what has been decided last Thursday at the European Council (summit)."

Nothing was said, publicly at least, to suggest that his appeal on that front was heeded.

Financial markets too had hoped at one point last week that the ministers meeting in Brussels would flesh out the political pledges from leaders to discuss hard financial aid.

Finnish Finance Minister Jyrki Katainen said that any help for Greece would have to be bilateral rather than pan-European, and added: "The only country that can help Greece is Greece itself."

Germany, where an opinion poll published over the weekend suggests a majority believe Greece should be thrown out of the euro zone, took a non-committal line in public during the talks in Brussels.

"We are listening to what the Greek government has to say, that is why we are here," said German Finance Minister Wolfgang Schaueble.

Greece confirmed last week it remained in recession in the last quarter of 2009, which deprives it of one natural channel of debt reduction.

The euro zone as a whole barely grew either as German GDP growth halted and Italy and Spain also registered GDP drops in the same period.

Asked if there would be a rescue plan for Greece, Juncker said: "This depends on how far Greece agrees to additional measures in case those are warranted."

Asked if Luxembourg would offer such help, he said "yes."

The premium that investors demand to hold 10-year Greek government bonds rather than benchmark German Bunds rose to 312 basis points on Monday, from 275 bps late on Thursday but dipped back closer to 300 later in the day, and the euro was trading down at 1.36 to the dollar.

(additional reporting by Brian Rohan, Tamora Vidaillet, Luke Baker; writing by Brian Love)