The EU's Economic and Monetary Affairs Commissioner Joaquin Almunia said on Tuesday that Greek Prime Minister George Papandreou's call for an austere budget and the restoration of the public finances was "a step in the right direction."

"We take note of the Greek government's commitment, as reiterated yesterday evening by Prime Minister (George) Papandreou, to cut public deficits and reduce government debt,” Almunia said.

However, he called on Greece to come forward with concrete proposals on how to clean up its finances in the course of January.

On Monday night, Papandreou called on all citizens to participate in rebuilding the economy, saying the country had "lost every trace of credibility." Over the next four years, Greece would reduce its current deficit of 12.7 per cent of gross domestic product (GDP) to less than 3 per cent, the prime minister said.

That is the level to which eurozone governments are meant to keep, under the rules which created the single currency.

Greece is a founder member of the eurozone, but its public finances have spiralled out of control in recent months, leading to fears of a default which could undermine the EU's common currency.

Deputy Finance Minister Filippos Sachinidis last week confirmed that the country was more than 300 billion euros ($440 billion) in the red, telling the parliament in Athens it was the largest public debt in the country's history.

A week ago, Almunia said in a statement that the commission would "continue to monitor the situation in Greece very closely" in the hope of forestalling financial meltdown.

"A difficult situation in one euro-area member state is a matter of common concern for the euro area as a whole," he said.

rb/dpa/AFP
Editor: Trinity Hartman