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Other countries also have run afoul of the limits, despite EU warnings and scoldings. Continued market skepticism about government finances means Greece and other troubled countries
-- such as Portugal, Spain and Ireland -- are already paying higher interest rates. That could force them to intensify austerity measures
-- less spending and more taxes -- that could cut wages, particularly in the public sector, and reduce or eliminate any economy stimulus for flagging growth. Greece on Tuesday tried to appease EU partners and markets by unveiling sweeping proposals to increase retirement ages, hike taxes on the powerful and wealthy Orthodox Church and force street vendors to issue receipts. Greek Prime Minister George Papandreou visits Paris on Wednesday for talks with French President Nicolas Sarkozy on the debt situation. EU governments could agree to jointly underwrite Greece's debt -- but this could hike the cost of their own borrowings.
They could also provide a loan to Greece -- but it is uncertain that they could or would provide enough to give Greece long-term relief. Greece is looking to borrow some euro51 billion ($70 billion) from bond markets to fund its budget gap this year. Another option would be bonds, issued jointly by European governments to raise money from markets. EU and ECB officials have talked this down but European socialists
-- including Greece's current government -- support the idea because it could ease harsh spending cuts. EU nations do not want to let Greece off the hook. Any option would force Greece to make long-delayed reforms to address rife tax evasion, change rigid labor market rules and overhaul an inefficient and high-spending pension and health care system. In Munich, Germany, teacher Sonja Trott said she wants any rescue money tightly controlled to ensure that it is used effectively. The 31-year-old said she didn't like seeing her taxes spent on Greece, but that it may be necessary. "I guess we can't afford to allow having one member state financially falling apart," she said.
[Associated
Press;
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