Brussels, 16/02/2010 (Agence Europe) - With the adoption of several recommendations relating to Greece on Tuesday 16 February, the Council set in place a surveillance mechanism, the first of its kind, recommended by the Commission to ensure the Greek government correctly complies with commitments made (EUROPE 10070). EU finance ministers are above all pressing Athens to foresee additional measures with a view to the upcoming Eurogroup and Council meetings, on 15 and 16 March. This will be a decisive deadline, as it will be a matter of assessing measures already taken and possibly presenting new, necessary initiatives. This will be the case if risks relating to the macro-economic situation and markets materialise, ministers say, and there is a strong likelihood of this happening. The commissioner for economic and monetary affairs, Olli Rehn, has already pointed out that there was a clear need for additional measures (yesterday's EUROPE). A technical mission will thus be sent to Athens in the next few days and an inquiry is underway to shed light on the arrangements used by Greece with the help of US banks to bring down its official debt level.
Within the framework of the procedure initiated in April 2009, the Council sent a letter of formal notice to Greece to take action in order to correct its excessive deficit by 2012 (Article 126.9 of the EU Treaty), in line with the objective that Athens had set itself in its stability programme (also endorsed by Council). Furthermore, the Council recommended that Greece bring its policy into line with the broad economic policy guidelines through a series of structural reforms on salaries, pensions, healthcare, public administration, etc (Article 121.4).
Greece, in any case, must be ready to make a greater effort in the shorter term. If, by the next meeting of eurozone finance ministers, it appears that commitments already taken by the Greek government are insufficient to reach a 4% reduction of deficit in 2010, then Greece undertakes to propose new measures, explained Jean-Claude Juncker after the Eurogroup meeting on Monday 15 February. These measures will relate not only to spending but also to receipts, and in particular “VAT increases and additional taxes on luxury products” or on energy products, he said.
Juncker went on to say: “We are convinced the Greek government's plan is ambitious” and that it will bear fruit, but if, for some reason, this were not to be the case, then additional measures will be taken “on the basis of a judgement made by the Commission and Council on the report that Greece is supposed to present to the Commission by 16 March”. It is “too soon to say exactly what these measures will consist of”, but “this will depend on the negotiations that the Greek government holds with Commissioner Olli Rehn”, he said. The Eurogroup will return to this subject during its next meeting (on 15 March) and will take a stance where necessary (by qualified majority) on the possible new measures suggested by the Greek government and the Commission. If Greece does not take action as it should between now and then, additional measures would be imposed on Greece by its partners.
The Commission will thus “make an on the spot visit to Athens in coming days” for a technical mission, Commissioner Rehn said on Tuesday. Commission experts accompanied by representatives of the ECB and International Monetary Fund, will be on the spot, probably at the beginning of next week, to verify implementation of measures already announced and to assess their impact at budgetary level. “We are ready to suggest other measures that could possibly be made an obligation”, Rehn stressed.
Greece is therefore under considerable pressure, and it has one month in which to prove its worth. The message to the markets, however, is just as clear - member states will show solidarity in case of need. “Greece is responsible for the consolidation of its public finances”, Juncker reiterated, saying this was first and foremost an “internal Greek problem”. However, he went on, if implementation of the Greek austerity plan does not lead to the hoped-for results, then “the eurozone declares it is ready to take the necessary determined and coordinated measures to ensure financial stability for the whole of the zone”. “We did not wish to take a stance today on instruments that we shall put to work”, he said, “as it would not be wise” to publicly discuss the options available in greater detail. However, should activation of certain instruments prove necessary, then they will be used, he stressed, saying: “We must base ourselves on the fact that instruments we shall have”. He stressed still further: “I believe that the financial markets are wrong to continue attacking Greece (…). Financial markets are greatly mistaken if they think they can pull Greece to pieces”.
On Tuesday, EU 27 ministers reiterated this position. Following the Ecofin Council, the Spanish Minister for Finance, Elena Salgado, declared: “If it is necessary, EU members will provide aid to Greece”. However, she did say that at this stage it was not necessary to explain what form this assistance could take. Commissioner Rehn explained that if such a situation developed, they had all the different instruments to take action and that the Commission would subsequently be ready to “put in place a European coordination framework for this different action”.
With regard to the different statistical aspects, in addition to the proposal aimed at strengthening Eurostat's auditing powers (EUROPE 10078), the Commission is currently putting the final touches to its action plan to tackle the problems recurring in Greece. The Commissioner stressed that it would be necessary to implement this by May at the latest. The Commissioner also confirmed that a probe would need to be carried out to shed light on the role played by US banks in concealing part of the country's debt (using a complex swaps system). Mr Rehn expects further clarification from the Greek authorities by the end of the week (19 February) on the most recent developments. The question of whether other member states have also used a sophisticated and identical accounting mechanism to hide the scale of their debts remains to be seen. The Commissioner provided assurances that if there were indications that this type of technique had been used by other member states, as well as Greece, they would request information in this connection from the countries in question. He explained that so far they had not received any indications to suggest that this had happened from Eurostat. Ms Salgado insisted that such a proposal had not been made by Spain and if it had been made, it would have been refused immediately, she explained. Mr Rehn affirmed ultimately: “Investment banks also have to ask themselves whether this behaviour did indeed comply with their ethical codes”. (A.B.)