Brussels, 12/09/2011 (Agence Europe) -German Chancellor Angela Merkel is urging patience from the parties calling for a rapid solution to the sovereign debt crisis in the form of leaving Greece to default on some of its public debt or of kicking it out of the eurozone. She said in a column in the Tagesspiegel newspaper on Monday 12 September 2011 that things that had been ignored in Greece for years could not be fixed overnight and patience was therefore required. Reacting to comments in Die Welt by Germany's economics minister Philipp Rosler (a liberal) that Greece's orderly bankruptcy should no longer be taboo, she argued that cutting off the financial aid to Greece would not be in Germany's interests. Der Spiegel magazine reported at the weekend that talks had taken place at the German finance ministry about how to protect German banks from a “restructuring” of the Greek debt. The markets continued to plummet on Monday under the pressure of the falling value of shares in the banks most exposed to the eurozone debt crisis.
The European Commission made it clear that it is not considering the option of Greece defaulting. A spokesperson for EU Economic and Monetary Affairs Commissioner Olli Rehn said that such a hypothesis was not being worked upon. Mentioning the 2011 report on public finance that the Commission had published that very day, the spokesperson acknowledged that it was worrying that the levels of debt in the eurozone would continue to rise between now and 2014, and hoped this would be followed by a consolidation of public finances. The spokesperson said it was essential that the commitments set out in the economic and budget programmes in the European Semester were implemented.
The G7 Finance Summit in Marseilles at the weekend noted that economic growth has petered out and there is a need for “concerted effort” at global level to introduce “ambitious” budget consolidation plans and stimulate the economy. Referring to their financial pledges (paying off debt and providing loans to over-leveraged countries), the eurozone countries said they remained determined to fully meet their individual sovereign debt liabilities.
The President of the European Council, Herman Van Rompuy, urged the eurozone to endorse the decisions taken at the special eurozone summit of 21 July 2011 on the details of the second Greek bailout and giving the EFSF bailout fund greater teeth (see EUROPE 10424). “We are facing difficult times. Strong commitment to implement the 21/07 decisions is a matter of absolute priority”, said Van Rompuy as he emerged from a meeting with Polish Prime Minister Donald Tusk. He said the most recent measures announced by the Greek government over the weekend were “positive” and should enable it to meet its 2011 budget commitments in a credible manner. He welcomed the resumption of the talks that same day between the Greek government and its creditors (the European Commission, the ECB and the IMF).
Herman Van Rompuy mentioned the measures to boost economic governance that he will be unveiling in a month's time once he has consulted all interested parties (the European institutions and the member states). The proposals will aim to ensure that action undertaken in the eurozone is more effective, to make communication more coherent and to boost budget integration. Talks will continue in this connection until an upcoming summit in December. On the fringes of the G7 summit in Marseilles, Germany's finance minister, Wolfgang Schäuble, said that along with his French counterpart François Baroin, he would be putting forward proposals at the ECOFIN Council on Friday 16 and Saturday 17 September 2011 in Wroc³aw (Poland) on how to increase economic governance. Following the surprise resignation from the European Central Bank of Jurgen Starck on Friday due to his disapproval of the ECB's policy of buying up eurozone sovereign debt, Germany's finance minister said he hoped that his deputy, Jörg Asmussen, would be appointed in his place (see EUROPE 10449).
Donald Tusk said the European Parliament should be in a position to vote at the end of the month to endorse the changes to the Stability and Growth Pact (see EUROPE 10447), but warned against changing the European treaty in this connection: “I'll be extremely cautious about engaging leaders in that debate today. Any discussions on Treaty could lead to less coherence among positions of leaders”. On Monday, Central and East European countries said that the future talks about boosting economic governance in the eurozone would alter the criteria set out in their Accession Treaties for joining the EU, which include the obligation to join the single currency (see separate article). In Marseilles, the British Chancellor of the Exchequer, George Osborne, said he had discussed with his European colleagues the option of amending the European Treaty over the next two years, an idea that Angela Merkel is now prepared to consider (see EUROPE 10447).
Greece. In Thessalonica on Sunday, Greek finance minister Evángelos Venizélos said that his country's absolute priority was meeting all its budget commitments, namely reducing the public deficit (apart from servicing the public debt) to €17.1 billion this year and €14.9 billion next year. He announced some special austerity measures to help Greece meet its budget commitments against a backdrop of serious economic recession. A tax on real estate will be introduced, based on surface area and locality. All Greek elected representatives, from the prime minister to the local town council leaders, will be required to give up a month's pay. Greek ship-builders will be required to enter negotiations with the government to ensure that they tighten their belts too. The idea is to fill a hole in the budget of the scale of some €2 billion (1% of GDP), explained Venizélos. To demonstrate the Greek government's willingness to take concerted action, he promised that next year's budget would be introduced early, between now and November. The same timing was also suggested for concluding the talks on how the private sector will contribute to the second bailout (€37 billion over three years), along with the talks on national ratification procedures for decisions made by eurozone summits.
Venizélos slammed suggestions that Plan B might include Greece leaving the eurozone, pointing out that the German government had denied all such rumours and on behalf of the Greek government, he himself had had to make a determined and very clear statement about the distasteful, malicious comments that are constantly circulating. He said the rumours were organised speculation that was not only aimed at Greece, but also at the very heart of the eurozone as a whole.
“I welcome the expressed commitment by the Greek government to fully meet the agreed fiscal targets this year and next, and to take the necessary consolidation measures to achieve these objectives. Today's decisions, including the levy on real estate, will go a long way in to meeting the fiscal targets. Greece needs to meet the agreed fiscal targets and implement the agreed structural reforms to fulfil the conditionality and ensure funding from its partners. This is fundamental to ensure the sustainability of public finances”, commented Olli Rehn. He said the fact-finding mission, which is back in Athens, should be able to complete its work by the end of the month and expected an ECOFIN Council meeting to finalise the details of the second Greek bailout, like the collateral demanded by Finland on its share of the EFSF loan. (M.B./transl.fl)