* EU: Greece take sufficient deficit steps
* Greece under unprecedented EU surveillance
(Updates with details, background)
BRUSSELS, March 12 (Reuters) - The Greek economy is expected to shrink by at least 2.25 percent in 2010 but austerity steps announced by Athens appear sufficient to safeguard budget targets, the European Commission said.
In a report to be debated by EU finance ministers on Tuesday, the bloc's executive arm lauded Greek steps to keep its swelling budget deficit under control this year as "ambitious", adding they should be followed by more steps in 2011 and 2012.
"Even if assumed that the worst quarterly real growth rates are already behind us (i.e. the largest contraction in economic activity was in the 4th quarter in 2009), annual real GDP is expected to decline further in 2010, by at least 2.25 percent," the Commission said in the report, released on Friday.
Bank of Greece
While the deeper contraction will hurt the budget, the Commission said Greece looked to have done enough to meet its promise to cut the deficit to 8.7 percent of gross domestic product this year from 12.7 percent in 2009.
Greek financial woes have sparked investor worries that the country may default on its debt, prompting tensions in the euro zone and talk about an EU bailout.
The country is struggling to reassure financial markets and European Union partners that it is serious about putting its economic house in order after years of overspending and cheating with statistics.
GOOD FOR NOW
"The fiscal measures announced by the Greek authorities ... appear sufficient to safeguard the 2010 budgetary targets," the Commission said.
A value added tax hike would bring extra revenue worth 0.5 percent of GDP, a rise in excise taxes another 0.5 percent and a higher levy on petrol 0.2 percent, the report said.
In total, the Commission said the new measures were worth 2 percent of GDP -- in line with what Greece has said.
Greece will now have to present a detailed report to the EU by May 15 on what it plans to do to bring its deficit below the bloc's deficit ceiling of 3 percent of GDP by the end of 2013 as agreed.
"The report ... should present in full detail the fiscal consolidation measures to be implemented in 2010, including a detailed calendar of implementation of all measures announced, but also the preparatory steps to be made for the respective measures to be taken in 2011 and 2012," the Commission said.
"The report should also include data on the monthly State budget execution, infra-annual budget implementation by social security, local government and extra-budgetary funds, debt issuance and reimbursements, public employment, spending arrears and financial situation in public enterprises," it added.
Greece would then have to submit follow-up reports on the quarterly basis. (Reporting by Marcin Grajewski; editing by Patrick Graham)