ATHENS – Starting with Finance Minister Evangelos Venizelos, whose position effectively would become moot, Greek officials said they will not go along with a proposal by Germany for the European Union to appoint a budget commissioner to oversee Greece’s finances and control how the money – mostly rescue loans being injected by the Troika of the EU-International Monetary Fund-European Central Bank – are being spent. Venizelos said Greece would reject the proposal out of hand even if it meant the country wouldn’t keep getting the bailouts which are keeping it from defaulting, although Greece already technically is broke.
He said Greece wouldn’t compromise its integrity, even though the Troika is giving Greece $152 billion in a first round of rescue loans and is offering a second round of loans amounting to $169 billion but only if Greece keeps cutting workers’ pay, raising taxes, slashing pensions, lays off 150,000 workers from the bloated public sector, and privatizes its assets to raise a possible $70 billion. A coalition government led by former ECB Vice-President Lucas Papademos as Prime Minister is negotiating the terms of the second deal, that could include a write-off of as much as 70 percent of Greece’s debt.
Still, Germany and IMF head Christine Lagarde said Greece has lagged in its reforms, while a German plan to appoint an overseer came after Troika officials repeatedly said Greek leaders do not have the political will to administer more reforms, especially as the three parties in the coalition – the former ruling PASOK, its bitter rival conservatives in New Democracy, and the far Right-Wing LAOS party have been battling amongst themselves as new elections loom, set tentatively in April.
Greek reaction to ceding national sovereignty and fiscal control was swift and angry, despite criticism that the country is responsible for overspending itself toward bankruptcy for generations, as PASOK’s and New Democracy’s alternating administrations have hired hundreds of thousands of needless workers in return for votes. Education Minister Anna Diamantopoulou, a possible PASOK candidate for Prime Minister, slammed the plan as “the product of a sick imagination.”‘
A German government document leaked to the Financial Times and seen in the Kathimerini English Edition proposed a commissioner to have veto powers over Greece’s budget decisions if it failed to meet demands set by foreign creditors. “Given the disappointing compliance so far, Greece has to accept shifting budgetary sovereignty to the European level for a certain period of time,” the paper said. Under the plan, Athens would also legally commit itself to paying its EU-IMF loans before spending cash on public expenditure.
Kathimerini said that despite the backlash in Athens, the German plan received open backing from a high-ranking official in Berlin. “We need more leadership and monitoring in implementing the course of reform (in Greece),” German Economy Minister and vice chancellor Philipp Roesler said in an interview with Bild newspaper. “If the Greeks fail to do this themselves, the leadership and monitoring must come in a stronger way from outside, for example through the EU,” said Roesler, leader of Chancellor Angela Merkel’s junior coalition partners FDP, who have seen their popularity tumble in the past few months as Germans grow increasingly angry that they have to pay for Greece’s profligacy.
German Finance Minister Wolfgang Schaeuble was even more blunt, telling the Wall Street Journal in an interview that the Eurozone, the 17 countries that use the euro as a currency, might stop the money pipeline unless Greece gives up control of its budget, as international lenders have come to believe the country wants virtually free money. “Greece needs to decide,” he said. He said while the EU is “prepared to support Greece” with the new loan package, that “Unless Greece implements the necessary decisions and doesn’t just announce them … there’s no amount of money that can solve the problem.” Greek leaders, starting with former Prime Minister George Papandreou, who resigned on Nov. 11, 2011 after 18 months of protests, strikes and riots over the austerity measures that came with the bailout, have repeatedly promised reforms but just as often backed away from them.
Schaeuble said Greece has to consider giving up its national sovereignty, an idea anathema to Athens and Greeks. “Perhaps we and our partners must look into ways to assist Greece in this difficult task in an even closer manner,” Schaeuble said. He did not say if he wanted a German to control Greece’s budget, a touchy subject in today’s Greece, which has been rattled by frequent German criticism and where even more than 60 years later many Greeks remember the Nazi occupation.
The Papademos government, in reaction to criticism that the country has done little to go after tax evaders, has begun rounding up those who owe more than 150,000 euros but none have been prosecuted, a common tactic in Greece. The Journal reported that Berlin officials say their proposal for more intrusive controls over Greece’s budget is one of several ideas being discussed, and that they are flexible about the specifics, but that something needs to be done about Greece’s slow compliance with the terms of its international aid.
Merkel was expected to discuss stronger enforcement of Greece’s reform measures with Papademos in Brussels on Jan. 30, when European leaders gather for a summit whose official agenda is how to improve economic growth in the Eurozone. Troika impatience with Greece is growing rapidly and Merkel recently said she now doubts whether the country can be saved from itself because there is no willingness to go after corruption, incompetency, tax evaders, or implement structural reforms to make the economy competitive. Greece, a country of 11 million people, has a near $460 billion debt and 10 percent deficit, and even waves of tax hikes imposed by Venizelos have done little to slow the country’s slide toward insolvency and default. Schaeuble declined to rule that out, saying, “We must see what the whole package will look like,” and that the independent ECB would make its own decision.
The Eurozone must decide by March at the latest whether to proceed with the second bailout deal for Greece, which some European officials say will be closer to $192 billion, a $30 billion increase over what was agreed upon last July. Without the money, Greece won’t be able to pay its loans, workers, or pensioners and will become the first Western country to default, which could set off a panic in the European, American and world markets and set off another recession worldwide. Greece is now in the fifth year of a recession and the austerity measures have created 18.2 percent unemployment and led to the closing of 100,000 businesses.