Greece came under severe fire from the European Commission on Wednesday for letting its budget deficit rise above European Union limits and for imprudent fiscal policies.
The Netherlands, also caught in the net of the Commission's sweep of countries failing to respect the battered Stability and Growth Pact on deficits, was treated less harshly, but was also told to get its financing gap back within EU limits.
"Greece's public finances show large imbalances, inconsistent with a prudent fiscal quality," the Commission said in a report on the host nation of the 2004 Olympic Games.
"Moreover, the quality of data is not satisfactory. Deficit figures in particular remain subject to potentially significant revision," the Commission added.
The Commission said the Greek deficit was at 3.2 percent in 2003 and would hit this again in 2004, although these figures were with the caveat of possible revisions.
"The breach of the three percent of GDP reference value appears due to a revenue shortfall and to higher than planned primary spending, including extraordinary funding, in particular related to the preparation of the Olympic Games," it added.
The report is part of the Commission's process of getting EU nations back in line with the rule of having a deficit under 3.0 percent of gross domestic product.
A report distributed by Greece's finance ministry showed on Tuesday showed the general government deficit was seen at 2.9 percent for 2004.
But Greece and the Netherlands are not alone in breaking the rules, with six euro zone states expected by the Commission to be over the limit in 2004, including France and Germany.
So many breaking the rules has prompted a debate over the future of the pact and whether its strictures stunt growth. German Chancellor Gerhard Schroeder has said he is open to discussing changes to the deficit limit itself.
DUTCH TOLD TO TAKE STEPS: In the meantime, the Commission is pressing ahead with enforcing the pact in its current form.
As well as Greece's deficit, it was worried about debt levels expected to remain above EU limits of 60 percent of GDP, hitting 103 percent in 2003 and 102.8 percent in 2004.
The Commission also took issue with the quality of the data provided by Greece, a recurring problem in recent years.
It said EU statistics agency Eurostat had not been able to verify 2003 debt and deficit data, and possibly for previous years, due to under-estimation of military spending and unreliable data on social spending.
The next step for the Commission is to draw up recommendations on how Greece should get its budget house in order. These are then sent for approval to EU finance ministers.
It is already at this stage with the Netherlands, where it said the deficit hit 3.2 percent of GDP in 2003 and was likely to exceed the limit again in 2004 as it measures already announced by the Dutch were not sure to reach their objective.
It said the steps that should be taken by the Netherlands should mainly be of a structural nature and amount to 0.5 percentage point of gross domestic product to make sure the deficit gets below EU limits from 2005.
It also asked for the Dutch to be given a deadline of four months from an EU ministers decision to take corrective steps, expected at a meeting on June 2.
It said the Dutch breach was due to "the prolonged economic downturn, that started in 2001, coupled with the fact that the Dutch government finances were in a more vulnerable position ahead of the slowdown that commonly appreciated at the time".
The Dutch government's annual report for 2003 confirmed on Wednesday the Netherlands ran a budget deficit of 3.2 percent of gross domestic product in 2003, overshooting the budget's original forecast of a 0.5 percent deficit as the economy contracted.
Dutch Finance Minister Gerrit Zalm welcomed the ruling by the European Union executive, noting that steps had already been taken to narrow the gap.
Zalm vowed on Tuesday to keep close tabs on local government spending to avoid a repetition of last year's breach of European Union budget rules.