Brussels tight-lipped on fresh austerity demands amid row with Athens

A joint commission, ECB and IMF team had arrived in Athens on Monday to begin an assessment of Greece’s progression in implementing the austerity and restructuring ordered by international lenders in return for the country’s first, €110 billion bail-out package.

However, the troika inspectors suddenly left the country, ending the mission early amid rumours of sharp disagreements between the two sides.

A Greek government source told EUobserver “There is no rift. The pause in the mission has been programmed all along.”

Equally, the commission was eager to calm suggestions of a major spat: “The atmosphere has been good and cooperative in the meetings with minister Venizelos,” EU economy spokesman Amadeu Altafaj-Tardio said. “The pause was agreed by both sides.”

But other EU officials on Friday said that the mission had been scheduled to continue through to next week.

Athens needed to show the troika it has been a model pupil in order for a fifth tranche of cash worth some €8 billion can be released by the end of September.

But a leaked report from the newly established State Budget Execution Monitoring Office, an oversight body independent of the government showed that the Greek government has veered well off target in reducing its debt levels.

As a result of a worse-than-expected economy, unmet tax collection targets and a lag in the implementation of promised government cuts and privatisation, the report argued, the primary deficit would be “significantly higher” that the target for the year. The country’s debt levels are “out of control”, the report said.

Even if all promised measures were implemented, debt levels would still be off target, the assessment continued.

The head of the Budget Office resigned on Thursday after the finance minister attacked the leaking of the report and describing the agency as without “knowledge, experience and responsibility”.

With the government failing to meet the targets set by international lenders, the question of whether still deeper austerity will be demanded remains, but the commission at this point stresses that Greece needs to implement “measures that have been agreed.”

“Additional measures are hypothetical at this stage,” said one EU official. “Only after we have a clear idea of the situation can we say [whether they will be necessary]. It is very difficult to assess without that clarity.”

In an official statement, the commission said that it expects the mission to return to Athens by mid-September, “When we expect the Greek authorities to have completed the technical work, to continue discussions on policies needed to complete the review.”

For its part, the Greek finance ministry maintains that the slippage is a result of a faltering economy rather than a failure to adhere to its austerity promises and that it will meet the agreed targets through special tax measures, with an extra emphasis on reducing tax evasion and collecting debts the government is owed.

Brussels ‘worried’ about Italy

Separately, the commission also said Italy on Friday that it was “worried” about compromises being made in the Italian parliament in order to assure endorsement of a fresh austerity package imposed via emergency decree on 12 August. The measures must be endorsed by the parliament within 60 days of the announcement of the decree.

“The commission is monitoring the parliamentary debate leading to the endorsement of the package but of course wait till there is a final text to make thorough assessment,” EU economy spokesman Amadeu Altafaj-Tardio told reporters on Friday.

As with Greece, the commission warned against a dependency on eliminating tax evasion as its efficacy is limited compared to the liberalisation of public services.

“However while we do not expect the agreed deficit targets to be called into question, we are worried to see a heavy reliance on fight against tax evasion in the new proposal for an amended package, as with the effectiveness of measures in this area, it is always difficult to assess the budgetary impact.”

Instead, Altafaj-Tardio said that the budget should depend more on “growth-enhancing measures” such as “further liberalisation in local public services and professions.”