Eurozone calls for tighter Greek surveillance

AP News
Posted: Feb 15, 2012 7:13 PM
Eurozone calls for tighter Greek surveillance

European finance ministers insisted Wednesday on much tighter oversight of Greece's spending and austerity efforts, despite politicians' assurances that Athens will go ahead with promised cuts and reforms to secure a euro130 billion ($170 billion) bailout.

Following a 3 1/2 hour conference call between the finance chiefs of the 17 countries that use the euro, the ministers welcomed the debt-ridden country's declaration that it had identified another euro325 million ($470 million) in cuts on top of the layoffs of thousands of public workers and other wage and pension cuts.

They also greeted written commitments from leaders of the two Greek parties that make up the coalition government to implement the promised cuts and reforms even if there is a change in power after elections expected in April.

But in a sign of deep distrust that has built up _ especially among rich nations like Germany, the Netherlands and Finland _ Jean-Claude Juncker, the prime minister of Luxembourg who also chairs the finance ministers' meetings, said the eurozone needed better ways to track Greek spending before new aid could be released.

"Further considerations are necessary" to ensure better surveillance of Greek finances, Juncker said, stressing that the new oversight had to ensure "priority is given to debt servicing."

Juncker's statement refers to a recent proposal by France and Germany to set up an account, separate from Greece's general budget, that would be dedicated to paying off Greece's massive debt. It was unclear whether this account would only manage the bailout money or whether government revenue could also be funneled into it.

Such an account would give the eurozone more control over what Greece does with its money, after the country has repeatedly missed budget, reform and privatization targets over the past two years. However, it could also be seen as an unprecedented interference into the fiscal affairs of a sovereign state.

The European Commission, which is in charge of economic surveillance in the European Union, is now working on a specific proposal for such an escrow account, which will be present to the ministers at a meeting on Monday.

In Athens, Finance Minister Evangelos Venizelos said a combination of the country's written pledges, Parliament's passage of the austerity measures with a two-thirds majority and labor reform legislation were "a credible response to all those in Europe who doubt our ability to implement the program and to continue its implementation after the coming elections."

But a German government official described the conference call as "intense and at times very technical." He said the participants received information on some of the debated topics only minutes before the call started, "which because of the short notice couldn't be verified and evaluated in detail."

The official said no minister challenged the idea that surveillance had to be strengthened and that paying off Greece's debts should have priority. He was speaking on condition of anonymity to discuss the confidential discussion between ministers.

Despite rumors that the bailout could be delayed until after the elections, Juncker said he expected the finance ministers "to be able to take all the necessary decisions" at their next meeting on Monday.

Finance ministers held their conference call amid doubts in some countries over whether the euro130 billion package of rescue loans, which comes on top of a euro110 billion bailout granted in May 2010, can ultimately save recession-ridden Greece.

The second bailout is also tied to a euro100 billion debt-relief deal with bondholders, under which the private creditors will swap the bonds they hold for ones with lower values and longer maturity dates.

Greece needs to secure the bailout before next month or it risks defaulting on a euro14.5 billion bond redemption in late March.

Venizelos said the country's austerity targets this year were clarified during Wednesday's conference call. But he added that the discussion also focused on the political and social situation in Greece, where two years of harsh cuts have led to frequently violent demonstrations.

In an appeal for unity among political parties and society in general, Venizelos insisted that austerity was the only possible way forward.

"Those who support ... another solution, but don't say what that solution is, or those who support a solution of an exit from the euro, return to the drachma, a solution of a default, are not offering any help to the Greek citizen," he said. "Those who criticize us because we are taking difficult decisions by cutting salaries and pensions, or reducing income and living standards, do not understand that with their reaction, their blind and myopic reaction, they are endangering the income, the pensions, the salaries, living standards which can suddenly collapse."

It is not only from within Greece that there is opposition to the country's bailout program.

Some European politicians have grown tired of Greece repeatedly missing budget targets and failing to implement promised cuts, reforms and sales of state assets. There are also concerns that the second bailout may not be enough to lift Greece out of its steep recession _ its economy shrank 7 percent in the final quarter of 2011 from a year earlier _ and leave it with a manageable debt load.

"There are many in the eurozone who don't want us any more," Venizelos told the country's president, Karolos Papoulias, earlier in the day.

Greece, Venizelos added, had to persuade the skeptics that the country could stay in the currency union and regain lost ground in reforming its economy.

"We are facing a situation that is particular because we are constantly being given new terms and conditions," he said.

In Berlin, German Chancellor Angela Merkel's spokesman, Steffen Seibert, sharply rejected a question about market rumors that Germany has decided a Greek bankruptcy is acceptable.

"I can say very clearly for the German government that these rumors are wrong _ there is no such decision by Germany," he said.


Becatoros reported from Athens, Greece. Derek Gatopoulos and Nicholas Paphitis in Athens, Geir Moulson in Berlin and Raf Casert in Brussels contributed.