Thursday

21st Jan 2021

Greece facing strict surveillance from Brussels

The European Commission has said it fully supports the Greek government's deficit-cutting plan announced last month, but outlined a strict surveillance programme at the same time to ensure targets are met.

The EU executive body also issued Greece with recommendations under the bloc's excessive deficit procedure, and used Article 121 of the Lisbon Treaty for the first time to push for badly needed structural reforms.

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  • Brussels intends to keep a close eye on Greece's efforts to scale back its deficit (Photo: ObeliX80)

"We are endorsing the Greek programme, we are giving confidence and supporting the Greek authorities," said outgoing EU economy commissioner Joaquin Almunia, in Brussels on Wednesday (3 February).

"But at the same time ...we need to strengthen instruments to monitor how the programme is implemented so as to avoid slippages, to avoid that the objectives are not reached," he said.

Commission recommendations on measures to reduce the deficit are largely in line with Greek government commitments, outlined in its January stability plan and expanded on by the country's prime minister, George Papandreou, in a televised speech on Tuesday.

Athens has promised to bring its deficit below three percent of GDP by 2012, after last year's shortfall hit 12.7 percent. It intends to increase revenue by eliminating tax exemptions, raising excise duties on tobacco and alcohol and introducing measures to fight tax evasion.

At the same time, the government says it will shrink its expenditure by cutting public servant allowances, freezing recruitment in 2010 and only recruiting one for every five civil servants retiring thereafter. Mr Papandreou's speech was met by fresh calls from Greek union's to attend a previously announced strike for civil servants on 10 February.

Markets

Greece's problems in the real economy have been compounded in recent weeks by market fears the southeastern EU country could default on its debt obligations.

Yields on Greek government bonds fell back on Wednesday following the commission announcement, after spreads with the German Bund reached an 11-year high last week.

Investors have questioned the socialist PASOK administration's ability to push through the tough deficit-cutting measures, after years of missed targets and an electoral campaign last autumn promising spending increases.

Commission statements are partially directed at these concerns. "Every time we observe slippages, we will ask the Greek authorities to take additional measures," said Mr Almunia.

EU finance ministers are expected to adopt the commission's recommendations at their next meeting on the 15-16 of February. The first monitoring assessment will take place one month later on 16 March, followed by a second on 16 May and at three-month intervals thereafter.

"This is a very tough system of monitoring but the confidence about the success of the programme" depends on it, said Mr Almunia.

Legal action over false data

Market jitters also stem from doubts over the reliability of the Greek fiscal data provided to the EU's statistics office, Eurostat. Last October the country's newly elected government upwardly revised deficit figures for 2008 and 2009, prompting widespread anger in Brussels and national capitals.

Mr Almunia announced the commission had initiated legal action against the Greeks as a result of this, and would seek auditing powers for Eurostat once the new college of commissioners had been approved by the European Parliament.

"We have adopted an infringement procedure regarding the statistical problems," he said.

"Politically we have also discussed the initiative ...of sending to the council [representing member states] in the coming days or weeks ...the legal proposal for the modification of the statistical regulations to give Eurostat audit powers when needed," he added.

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