The European Union's executive on Wednesday gave Greece until the end of 2012 to bring its runaway budget deficit under control as it set out a package of measures designed to stabilize the euro, dpa reported.
The move came as the European Commission set out the most detailed monitoring system it has ever imposed on a eurozone country, effectively taking control of sweeping aspects of the Greek budget.
"This is a very tough system of monitoring, but the confidence about the success of the programme ... is directly linked with the political support that the Greek authorities will receive" from Greek society and the EU, Economic and Monetary Affairs Commissioner Joaquin Almunia told journalists in Brussels.
The commission, the EU's executive, "will monitor the execution of the budget and of the reforms very closely and regularly," he said.
The commission threw its full weight behind a detailed Greek plan aimed at bringing the government's debt back under control and restoring its vanished credibility by slashing spending and increasing tax revenues.
That effectively binds the Greek government to measures such as freezing public-sector wages, stopping new hiring in 2010 and boosting excise on tobacco and alcohol sales, since the EU's executive will step in if they are not implemented.
"Every time we observe slippages, we will ask the Greek authorities to adopt additional measures," Almunia warned.
It also binds the Greek government to presenting, from March 16 onwards, a series of quarterly reports explaining exactly how it is implementing its planned reforms, so that it can bring its budget deficit below 3 per cent of gross domestic product (GDP) by 2012.
Those reports will have to be made public, not limited to diplomatic circles, the commission stressed. Under EU rules, member states are meant to keep their deficits below 3 per cent of GDP.
The commission also ordered Greece to carry out wholesale economic reforms to cut red tape and boost innovation and investment, in an attempt to prevent any return to the current desperate situation.
And it threatened to take Greece to the European Court over the failure of its statistics bureau to report reliable numbers. The poor quality and perceived political bias of Greek official figures has long been a source of criticism in Brussels.
The euro, the EU's flagship currency, has taken a battering in recent months following the revelation that the last Greek government - voted out of office in October - had massively understated its budget deficit when it said it was 3.5 per cent of GDP.
Immediately after the election, the new socialist government revealed that the real figure for 2009 was 12.7 per cent.
That revelation provoked outrage across the EU, with some states accusing the Greeks of fraud.
Money markets also responded with dismay. Over the last two months, the euro has lost some 8 per cent of its value against the dollar - largely thanks to concerns over Greece and fears that other euro states, such as Portugal, could also face budget problems.
Greece and Portugal "share some common problems", such as falling competitiveness and high external financing debts, Almunia admitted.
In January, the Greek government proposed a draconian budget plan aimed at hitting the 3-per-cent target in 2012 by measures such as freezing public-sector wages and cracking down on tax evasion.
On Tuesday, Prime Minister George Papandreou proposed further measures, expanding the wage freezes and raising fuel excise rates.
Almunia welcomed that move, rejecting suggestions that Greece might have to be bailed out by the International Monetary Fund and saying that the EU was strong enough to tackle the problem alone.
"I am fully convinced that the EU and the euro-area countries and system have instruments enough to cope with this challenge, to deal with this issue, to solve these problems, and it's what we are doing," he said.
Almunia also said that the next commission - expected to take office later this month - would propose laws to give its statistical branch, Eurostat, the power to audit national accounts. EU member states rejected an earlier proposal to that effect in 2005.
"If Eurostat had received audit powers during the previous years, it is possible that the present statistical problems would not have occurred," Almunia said.
Wednesday's commission meeting endorsed the proposal in principle, but could not take a legal decision on it because its formal mandate has expired, he said.