Page last updated at 19:10 GMT, Monday, 30 November 2009

Greece acknowledges debt concerns

George Papaconstantinou, Greece's finance minister
George Papaconstantinou is Greece's finance minister

Greece's new government is working to correct a "lack of credibility" in the financial markets, its finance minister has told the BBC World Service.

George Papaconstantinou's comments came as concern grows about its ability to pay its debts, fuelled by Dubai's financial problems.

He said the government was working to reduce Greece's substantial budget deficit and government debt.

But Mr Papaconstantinou argued Greece would not need an EU bail-out.

Governments and companies issue bonds to raise money on the financial markets.

Markets are concerned about the vulnerability of government bonds following comments from Dubai's government minister that it would not guarantee troubled property firm Dubai World's debt.

The Mediterranean country's deficit is estimated at 12.7% of GDP, with debt above 110% of GDP.

Greece's finance minister George Papaconstantinou said in an article published in the Wall Street Journal that the cost of Greek government debt and the cost of insuring it had risen.

'Worried looks'

He told the BBC World Service's Europe Today programme that he understood international concern about the country's credibility but said that was down to the actions of the previous government.

"We are aware that we have a very difficult economic and fiscal situation. We are concerned that the international markets are looking at us in a very worried way. We do believe there is a credibility issue here having to do with the policies of the previous government and we're working to correct that lack of credibility."

Mr Papaconstantinou said that the government was already doing what it could to try to reverse the situation.

"We're committed to fiscal sustainability and we're showing this with a new budget that we have tabled to parliament which reduces the budget deficit by 3.6 percentage points. "

Although he promised a reduction by 2010, he said that changes wouldn't be made "overnight" but called for a "suspension of disbelief" so the international community would not lose faith in Greece in the meantime.

Mr Papaconstantinou said the new socialist government had inherited the debt and he was confident that Greece's finances would not worsen under the new regime.

"There will not be a point where the EU will need to come to the rescue of Greece. This is because we are sending the right signals and putting into force the kind of policies that reassure that we are serious about fiscal sustainability."

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