By Jan Strupczewski
Brussels (Reuters) - Euro zone finance ministers will pile up pressure on Greece on Monday to fully implement planned budget deficit cuts so that the euro area would never have to deliver on its last week's pledge of support for Athens.
European Union leaders issued a statement on Thursday saying Greece had to do everything it could to reduce its budget gap of 12.7 percent of GDP to below the EU ceiling of 3 percent in 2012, including a 4 percentage point cut this year.
But leaders also said the euro zone would take determined and coordinated action, if needed, to safeguard financial stability in the euro area as a whole, sending a signal to markets that they would not let Greece default on its debt.
But the leaders did not specify what the euro zone could do to support Greece, if needed, which disappointed markets.
The premium investors demanded to hold 10-year Greek government bonds rather than benchmark German Bunds rose sharply on Friday to 302 basis points, from 275 bps late on Thursday.
But euro zone officials were adamant the work must be done primarily by Greece rather than by the euro zone at this stage.
"The key thing in the statement from the leaders is that Greece must do what it must do. If they do that, there will be no need for specific measures," one euro zone source involved in the preparations of the ministers meeting, the Eurogroup, said.
"If they don't do that, there will be a show of determined and coordinated action, which is unspecified as yet," it said.
Such measures will not be discussed on Monday because it was too early, several euro zone sources said. Greece was still able to borrow money on the market and detailing rescue steps now would send a signal that the situation was critical already.
"The ministers are very reluctant to define anything ex-ante. When there is a problem, they will sit down and hammer it out in 30 minutes," a second euro zone source said.
Eurogroup Chairman Jean-Claude Juncker told the German Sueddeutsche Zeitung newspaper in an interview on Saturday there were instruments available for an intervention that could be used when necessary, but he would not name any at this stage.
On Monday and Tuesday, EU finance ministers will endorse the Greek deficit cutting plan which has already been approved by the European Commission, the EU executive arm.
They will also step up the 27-nation bloc's disciplinary budget procedure against Athens to the last stage before sanctions. If Athens does not take the action recommended by the ministers to cut the deficit over the next four months, the EU could fine it.
"There will be more pressure on Greece to deliver rather than more work in preparing the euro zone for a scenario that Greece fails to deliver," the first euro zone sourced said.
Sharp upward revisions to Greek deficit and debt figures last year led to ratings downgrades and sent yields soaring, denting investors' confidence in the country's ability to service its huge debt of more than 120 percent of GDP.
Greece has responded with a plan to cut its budget deficit below 3 percent by 2012 through various measures, including wage cuts and tax and pension reforms. But this sparked strikes from trade unions showing how politically difficult the plan was.
The growing market concern over Greece spilled over to other high-deficit euro zone countries like Spain and Portugal, which also have to borrow at a higher cost as a result.
Yet a poll published on Sunday showed that there was little political backing for a potential euro zone bailout of Greece.
The Emnid poll for Bild am Sonntag newspaper showed 53 percent of Germans said Greece should be thrown out of the euro zone if necessary and more than two-thirds opposed handing Athens billions of euros in credit.
(Reporting by Jan Strupczewski, editing by Mike Nesbit))
