By Jonathan Stearns and Emma Ross-Thomas
(Bloomberg) – The European Union’s top economics official said Greece should take more measures to cut the region’s largest budget deficit as evidence emerged that the nation may have used swaps to mask its swelling debt.

“We expect that in due course the Greek government will take the necessary additional measures,” European Union Economic and Monetary Affairs Commissioner Olli Rehn told reporters in Brussels today before a meeting of EU finance chiefs. Greek Finance Minister George Papaconstantinou said his task was like changing “the course of the Titanic.”

Finance ministers meet today to review Greece’s deficit plan under pressure from investors to spell out the concrete actions they will take to rescue the country if it fails to convince markets it can control its budget gap. Even as the risk premium on Greek debt fell last week on the prospect of European support, the euro weakened on concerns about the euro region’s stability.

Greece’s deficit, at 12.7 percent of gross domestic product last year, was the highest in the EU, and the government of Prime Minister George Papandreou has pledged to slash the shortfall to the EU limit of 3 percent in 2012. It has set a target of 8.7 percent of GDP for this year, even as its cost- cutting moves have triggered strikes.

Papaconstantinou said in Brussels today that the government is “doing enough” on the deficit. “People think we are in a terrible mess. And we are,” he said.

Finance Chiefs

Luxembourg’s Jean-Claude Juncker, who will lead today’s meeting as head of the group of euro-area finance chiefs, said the ministers need reassurance that Greece can reach the target.

“Greece will have to make sure it cuts its deficit by 4 percent of GDP for 2010. We have to check if that’s possible or not,” Juncker told reporters in Brussels. Spanish Finance Minister Elena Salgado, whose government currently holds the rotating EU presidency, also said ministers would discuss the possibility of imposing extra measures on Greece tomorrow.

Underscoring concerns about Greece’s public accounts, a Greek government inquiry has uncovered a series of swaps agreements with securities firms that may have allowed it to mask its growing debts. The Feb. 1 report commissioned by the Finance Ministry in Athens didn’t identify the securities firms that Greece used.

The EU’s statistics office has asked for more information about the transactions by the end of February, European Commission spokesman Amadeu Altafaj told reporters in Brussels today. Johan Wullt, a spokesman for the Luxembourg-based statistics office, said that “until recently, Eurostat was not aware” of the transactions.

Vice President

The extra interest investors demand to hold Greek 10-year bonds rather than German equivalents was 300 basis points today, down from a high of 396 points at the end of January.

Finance chiefs from the 16 nations sharing the euro meet at 5 p.m. in Brussels, where they also may decide who will replace Lucas Papademos in June as vice president of the European Central Bank. Juncker will hold a press conference after today’s meeting. They will be joined tomorrow by their colleagues from the rest of the 27 European Union countries.

– With assistance from Jurjen van de Pol in Brussels, Editors: Jones Hayden, Andrew Davis

To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net

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