The president of the European Central Bank has welcomed additional measures unveiled by the Greek government on Tuesday (2 February) to reduce the country’s budget deficit.

Jean-Claude Trichet said that the reforms, which include overhauls of the Greek tax and pension systems, were “steps in the right direction”.

The measures complement a structural reform plan approved by the Greek government in January and endorsed yesterday (3 February) by the European Commission.

The Greek government has said that it will bring its deficit to within 3% of gross domestic product (GDP) by 2012. This target is expected to be made binding on Greece by finance ministers on 16 February.

Greece estimates its deficit for 2009 at 12.7%, the largest in the eurozone.

Trichet said the bank was “confident” that Greece would take all the necessary measures to reach the 2012 goal. He said the planned reforms were crucial for “sustainable growth and job creation in Greece”.

Asked about what kinds of support the EU or eurozone could offer Greece in its budget consolidation efforts, Trichet said that Greece received “ex ante” support by being a member of the eurozone. He said that, as a eurozone country, Greece benefited from “very easy financing of its current account deficit”.

European Voice reported on 21 January that EU officials were considering ways of providing a heavy conditioned loan to Greece.

State of eurozone finances

The ECB’s president also sought to downplay the threat that the economic and financial crisis poses to the 16-country eurozone as a whole, saying that the weakness of the public finances should not be exaggerated.

He cited estimates from the International Monetary Fund (IMF) that the eurozone’s current-account deficit in 2010 will be around 6% of GDP, compared to over 10% in the US and Japan.

The same point was made by José Manuel Barroso, the president of the  Commission, on Tuesday (2 February).

Trichet said that the bank’s governing council would decide next month when to phase out extraordinary measures introduced by the ECB during the financial crisis. The extraordinary measures include the provision of unlimited liquidity to banks during the ECB’s main refinancing operations, increased provision of three-month loans to banks and, as an exceptional measure, to provide six-month and one-year loans.

The ECB stopped providing one-year loans in December and it has already said that the next six-month loan operation (in March) will be the bank’s last.

“The governing council will…take decisions on the continued implementation of the gradual phasing out of the extraordinary liquidity measures,” Trichet said. He added that the measures were “not needed to the same extent as in the past”. 

Trichet made a strong call for member states to reduce their budget deficits, saying that “high levels of public deficit and debt place an additional burden on monetary policy and underline the stability and growth pact”.

“It is of paramount importance that the stability programme of each euro area country clearly defines the fiscal exit and consolidation strategies for the period ahead,” he said, adding that a “strong focus” should be placed on expenditure reforms.

• The ECB decided to keep interest rates on hold, the ninth month that it has opted to keep its monetary policy unchanged. The decision means that the bank’s main refinancing rate remains at 1%, a historic low. Trichet said the current rate remained appropriate given that price inflation remains “subdued”.