Greece faces 'massive' loss of sovereignty

04.07.11 @ 09:22

  1. By Honor Mahony
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BRUSSELS - Eurozone finance ministers over the weekend staved off looming bankruptcy in Greece by agreeing to release the next tranche of aid to the country, but Athens will pay with a massive loss of its sovereignty, the eurozone chief has said.

  • A tear gas canister lying on the street in Athens (Photo: Tilemahos Efthimiadis)

In return for the €12 billion - the fifth payment from the €110 billion EU-IMF loan agreed last year - Greece will have to push through a swathe of privatisations reminiscent of the selling of East German firms in the 1990s after the fall of Communism.

"The sovereignty of Greece will be massively limited," Jean-Claude Juncker told Germany's Focus Magazin in an interview published on Sunday (3 July), just hours after the eurozone ministers reached agreement.

"For the upcoming wave of privatisation they need a solution modelled on the German Treuhandel," he said referring to an agency used by Germany to sell off some 14,000 former East German firms, at a huge job and profit loss.

Greece has agreed to raise €50 billion by 2015 through a massive sell-off of state assets. This and austerity measures imposed by the government have been hugely unpopular, bringing Greeks to the streets in their thousands to protest.

In order to make sure Athens follows through on its commitments, the plan will be "supplemented by large-scale technical assistance" from the European Commission and member states, finance ministers said Saturday.

Acknowledging the difficulty for Greece, the Luxembourg prime minister said that Greeks should not be "insulted" so much as supported and looked after. Still, he pointed out that the country had brought its fate upon itself.

"[The crisis was] largely self-made​​. Between 1999 and 2010, wages rose by 106.6 percent, even though the economy did not grow in equal measure. The wage policy went completely out of control, while productivity was not taken into consideration," said Juncker.

Over the weekend the EU ministers agreed to pay €8.7 billion to Greece. The remaining €3 billion is expected to be signed off by the IMF by the end of this week.

The agreement means that Greece will be able to meet its repayments due mid this month.

However, the ministers did not agree the terms of a whole new bailout noting that the "precise modalities and scale of private sector involvement" had yet to be determined. Agreement is now expected in September although the issue will be discussed again when ministers meet on 11 July.

One of the sticking points is a Finnish demand that it can lend to Greece only if Athens provides collateral. There is also uncertainty over a German-led push to enlist private creditor participation.