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Greece needs EU support - OECD chief

ATHENS (Reuters) - OECD Secretary General Angel Gurria yesterday called on EU finance ministers to show strong support for Greece, saying it deserved to be helped now that it had presented a comprehensive deficit-cutting package.

Greece's socialist government unveiled public sector pay cuts and tax hikes this month to help slash a double digit budget deficit and exit a debt crisis that has shaken the euro zone.

"Greece deserves to be supported given the package and the policy measures that it has announced," Mr. Gurria said in an interview after meeting senior Greek officials in Athens.

Euro zone finance ministers met yesterday evening to discuss financial aid to help Greece tackle its debt problems, but there were signs France and Germany were reluctant to make concrete commitments.

Asked what the EU ministers should do for Greece, Mr. Gurria said: "(Give a) clear, strong signal of support that the markets will understand."

"It can either translate into guarantees or into some outright resources or maybe some capacity to absorb some of the bonds or to enhance the quality of the bonds, something markets will understand and something which will allow Greece to reduce the cost of its borrowing," he told Reuters.

Gurria said there were no easy answers for the European Union but pointed out that the IMF already had instruments in place to deal with such problems.

"This (going to the IMF) should not be taboo, there is no reason why Greece could not consider the possibility of going to the IMF, as an option or a complementary solution," he added.

Asked if Greece's austerity measures would be enough to take the country out of its debt crisis he said a lot would depend on implementation, urging Greece to show results quickly: "If we have good results in the beginning it will tend to reinforce confidence and then the markets will help it to become a self-fulfilling prophecy, a success," he said.

Under pressure from markets and EU peers, Greece announced additional cuts worth 4.8 billion euros earlier this month to make sure it cuts its 12.7 percent of GDP budget deficit in 2009 to 8.7 percent this year.

He said Greece should also focus on long term reforms in area such as the pension system or the flexibility of the labour market. The OECD published separately yesterday detailed recommendations for Greece: http://www.oecd.org/dataoecd/6/39/44785912.pdf

Mr. Gurria declined to make a growth forecast for Greece but said it would not be as bad as last year, when the economy contracted by two percent, according to revised government estimates.

Global economic recovery will be stronger than previously estimated this year, helped by robust growth in China and India, Mr. Gurria said.

"The global economy should be moving at 4 to 4.5 percent, the OECD economy at around two to 2.5 percent," he said.

The OECD had predicted in November that the global economy would expand by 3.4 percent this year, after an estimated contraction of 1.7 percent in 2009. OECD area growth for 2010 was then seen at 1.9 percent.

"The reason why the global economy is going to grow faster is because China and India are pulling very hard," he said.

Governments should not yet withdraw economic stimulus measures, but they should indicate how they plan to return to sustainable fiscal and tax positions, the OECD chief said.

The OECD will unveil its new economic forecasts on April 7.