Commission downplays leak of troika report on Greece

"[Eurogroup chief Jean-Claude] Juncker had asked if we could circulate a brief document outlining some ideas ahead of a teleconference on Greece for a review of the next steps," he continued. Eurozone finance ministers launched official talks on Wednesday on a second Greek bail-out.

"But this was not supposed to be a pre-release specially for German MPs. Things repeatedly get leaked in Germany no matter what we do."

On Thursday (9 June), a detailed leak of the document was widely reported in the German media and further afield after German MPs were presented with the document.

The summary report said that Greek austerity efforts have stalled and that the country is not succeeding in meeting its fiscal projections and that it will need another round of financing.

"Greece will likely not be able to return to markets in 2012," the document declared.

"The financing strategy needs to be revised. Given the remoteness of Greece returning to funding markets in 2012, the adjustment program is now under-financed. The next disbursement cannot take place before this under-financing is resolved."

The document said that the recession "appears to be somewhat deeper and longer than initially projected," with a further contraction of 3.8 percent this year following last year's fall of 4.5 percent.

The paper also said that the austerity and structural adjustment efforts have ground to a halt and called for a renewed effort: "After a strong start in the summer of 2010, reform implementation came to a standstill in recent quarters."

If no further action is taken, it warned, the government deficit for 2011 is likely to remain close to the 2010 level, above 10 percent of GDP.

However, the paper also said that the country has a trump card to play in its wealth of property still held by the government and called for a deep fire-sale of such assets.

"The Greek government is one of the European sovereigns with the richest portfolio of assets," the document continued.

"Most of these assets have not provided any relevant revenue; loss-making state-owned enterprises have actually been a source of costs borne by the taxpayers. Privatising those assets will contribute to reduce the government balance-sheet."

The paper also said that the privatisation programme of the government will be overseen by an independent body rather than the government itself.

"To accelerate the procedure, and ensure the irreversibility of the whole process, the appropriate governance is being put in place: a privatisation agency managed by an independent and professional board."

The commission and eurozone states are to nominate observers to its board of this agency and binding quarterly targets on privatisation receipts would be part of the conditionality of a second bail-out.

The independent board with external oversight but no veto amounts to something of a compromise between Athens, which was willing to set up an agency independent of government and the position of the Netherlands and Luxembourg, which have said they do not trust the government to follow through on privatisation and said it should be externally controlled. The commission for its part has said that the Dutch proposal amounts to too much of an infringement of sovereignty.

The troika document also said that work should be performed to shift taxation away from progressive forms on labour to consumption-based taxation, similar to calls from the commission on Tuesday in its assessment of all 27 EU states' economic plans.

The paper said this was one possible area of concurrence with the Greek conservative opposition, which believes that massive tax cuts will deliver a return to growth. The troika, which is concerned that the government, with its unruly backbenchers unhappy about austerity measures, is unstable and is keen to push the opposition to embrace a new austerity package, which was due to be presented to parliament on Thursday. The overall tax cut plans however, it said, were "unrealistic".

Opposition leader Antonis Samaras was in Brussels on Wednesday, where he was pressured by commission chief Jose Manuel Barroso and EU Council President Herman van Rompuy to act "responsibly" and support the plans.

Van Rompuy called on Samaras to "urgently" give his backing.

Barroso for his part urged his fellow conservative to "reach a broad national consensus so that Greece can face in the most determined and effective manner its present historical challenges."