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GUY RAZ, host: European financial markets, especially bank shares, slumped badly today. That's after Greece conceded it will not meet its deficit-reduction goals for this year or next, despite new austerity measures. Benchmark indexes in France, Germany and Spain all fell 2 percent.

As NPR's Eric Westervelt reports now, the news out of Greece reinforced serious doubts about its second planned bailout, and brought the debt-troubled country another step closer to default.

ERIC WESTERVELT: The Greek budget sent to Parliament today shows a deficit this year of 8.5 percent of GDP, well short of the 7.6 percent goal Greece agreed to for its bailout program. Greece also said next year's budget is estimated to miss deficit- reduction targets set by its European lenders.

Some Greek officials and economists said the news supports their argument that the country cannot possibly cut its way out of debt. They need growth strategies as well. They point out that in part because of a wide array of austerity measures, Greece's economy is set to contract a record 5.5 percent this year, far higher than estimated.

Economist Yanis Varoufakis is with the University of Athens.

YANIS VAROUFAKIS: If you have an economy which is in free fall, the private sector is de-leveraging - it is cutting its investment and its consumption - and then the state comes along and does the same, then the sum of public consumption, public expenditure and private expenditure will go down, and that sum is national income. So if you're in a depression and you reduce that national income, the deficit is not going to get better, especially during a period when more loans are being piled upon this insolvent entity called Greece.

WESTERVELT: The deficit news could further jeopardize Greece's next installment of bailout money, an 8 billion euro infusion the country desperately needs in two weeks in order to avoid bankruptcy. That's because Greece's so-called troika of creditors - the European Union, the International Monetary Fund and the European Central Bank - have said over and over again that in order for Greece to receive its regular installments, the government has to meet clear deficit-reduction and budget-trimming goals.

Greece, this weekend, agreed to cut 30,000 public-sector jobs through early retirement and layoffs, in a further effort to meet the lenders' conditions. The reaction today from Germany, the eurozone's largest economic player, was muted because it's a national holiday, Unification Day, and all offices were closed. Ahead of a meeting of finance ministers in Luxembourg today, the E.U.'s economic affairs commissioner, Olli Rehn, tried to send a message of reassurance that the E.U. is taking action.

OLLIE REHN: We have a very important meeting after critical transfer today, and it's essential that today in the meeting, the ministers will discuss and prepare the systems on our comprehensive studies to overcome the crisis.

WESTERVELT: But critics say there is no comprehensive strategy from the E.U. There's just a reactive, slow, inbox approach that has not worked to ease a crisis that's already seen bailouts of Greece, Ireland and Portugal. Today, George Osborne, the finance minister of the U.K., which is not in the eurozone, stressed that the currency block needs to take decisive action.

GEORGE OSBORNE: They need to increase the size and firepower of their financial fund, their bailout fund. It doesn't matter how they do it, but they need to get the resources into it so that it's got more oomph, it's got more firepower. Second, they need to deal with their weak banks, which are a real drag on growth across the European continent. Third, on Greece, they need to decide what they're going to do with Greece, and stick by that decision.

WESTERVELT: Osborne added that the tough decisions are up to Greece and the eurozone states. But whatever they do, he said, they need to make the decision now and stick to it.

Eric Westervelt, NPR News, Berlin.

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