30th Nov 2022

Greek criticism directed at EU institutions, says minister

Greek finance minister George Papaconstantinou went on the defensive on Monday (15 February), seeking to quell controversies surrounding recent comments made by the country's prime minister, George Papandreou, and reports of dubious dealings between Athens and Wall Street investment banks.

At an informal EU summit last Thursday, euro area leaders agreed to take "determined and co-ordinated action if needed to safeguard financial stability in the euro area as a whole." But in but a televised address a day later, Mr Papandreou appeared to criticise his EU partners, accusing them of creating a "psychology of looming collapse".

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  • Greece is accusing the EU institutions of sending mixed signals (Photo: John D. Carnessiotis, Athens, Greece)

Speaking to journalists in Brussels on Monday ahead of a meeting of eurozone finance ministers, Mr Papaconstantinou said the criticisms had been directed at EU institutions and not national capitals.

"He [George Papandreou] said in the last few months that we've often had mixed signals from a number of European institutions. He did not say ... that there were mixed signals from the European Council [of EU leaders]," insisted the finance minister.

EU institutions and national capitals have engaged in a tricky balancing act regarding Greece, say analysts. On the one hand they have sought to convince jittery investors that Athens will not be allowed to default on its debt obligations, while at the same time avoiding the signal that overspending governments will simply be bailed out.

Wall Street

The Greek administration also found itself embroiled in a second controversy on Monday, after news of dealings with Wall Street banks broke over the weekend.

Investment firms including Goldman Sachs arranged currency swaps for Greece over the last decade that allowed Athens to raise funds to reduce its budget deficit while pushing payments well into the future. Those transactions were not classified as loans, reports the the New York Times, and not made known to Brussels officials.

European Commission economy spokesman Amadeu Altafaj Tardio told a news conference in Brussels that the EU's statistics office, Eurostat, has already sought answers to the allegations, but Mr Papaconstantinou defended his country's actions.

"These kinds of more exotic financial instruments were, at the time, completely Eurostat legal," he said. "Greece was not the only country using them. They have since been made illegal and Greece has not used them since," he added.

Mr Papaconstantinou, a deputy in the European Parliament until elections last October brought Greece's center-left Pasok party to power, also implied the timing of the news story was more to do with different investment banks attempting to sully each others reputations, rather than the legitimacy of Greek dealings.

Confidence deficit

But the story is unlikely to help the Greek position, with Athens already suffering from a crisis of confidence.

At 12.7 percent of GDP in 2009, Greece's budget deficit is high but comparable to a number of other EU member states such as Ireland and the UK. Debt levels currently exceeding 110 percent of GDP and a past track record of failing to reach targets have caused Greece to become the focal point for market concerns however.

Doubts over the reliability of the country's statistical data have also contributed to the recent investor flight from the country's bonds and demands for higher yields.

On Monday, the college of 27 European commissions adopted a formal proposal to give Eurostat auditing powers, part of a bid to end doubts over the Greek data. If approved by national governments, the amended regulation on data collection will allow for more frequent and comprehensive statistical visits by Eurostat to member states.

In 2005, the EU executive body made a similar request for Eurostat auditing capabilities but was rebuffed by member states, who were reluctant to hand over power to the Luxembourg-based body. Observers suggest the current Greek crisis has softened government positions however.

As well as investors, European citizens outside Greece have expressed their exasperation with Europe's black sheep. A new poll published in Germany on Sunday shows a majority of Germans want the debt-ridden state to be thrown out of the eurozone, if necessary, and more than two-thirds oppose handing Athens billions of euros in credit.

Mr Papaconstantinou said he could understand German frustration, but pointed out that the EU and eurozone had brought great benefits to both strong and weak members, including in the area of trade and tourism.

"I think we need a more objective and cold assessment of what is going on," he said, warning against a debate that "touches on elements that we dont want to see in Europe in terms of divides between the north and the south."

ECB says more rate hikes to come

European Central Bank president Christine Lagarde said more rate hikes will come, but also admitted a recession will not lower inflation — leaving some economist question the logic of the policy.


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