Germany wants Greece to give up budget control

[jimmy olsen]

The Hun strikes!

http://www.reuters.com/article/2012/01/27/us-eurozone-greece-germany-idUSTRE80Q1ZF20120127?feedType=RSS&feedName=businessNews&utm_source=dlvr.it&utm_medium=twitter&dlvrit=56943

Exclusive: Germany wants Greece to give up budget control

By Noah Barkin

BERLIN | Fri Jan 27, 2012 6:59pm EST

(Reuters) - Germany is pushing for Greece to relinquish control over its budget policy to European institutions as part of discussions over a second rescue package, a European source told Reuters on Friday.

"There are internal discussions within the Euro group and proposals, one of which comes from Germany, on how to constructively treat country aid programs that are continuously off track, whether this can simply be ignored or whether we say that's enough," the source said.

The source added that under the proposals European institutions already operating in Greece should be given "certain decision-making powers" over fiscal policy.

"This could be carried out even more stringently through external expertise," the source said.

The Financial Times said it had obtained a copy of the proposal showing Germany wants a new euro zone "budget commissioner" to have the power to veto budget decisions taken by the Greek government if they are not in line with targets set by international lenders.

"Given the disappointing compliance so far, Greece has to accept shifting budgetary sovereignty to the European level for a certain period of time," the document said.

Under the German plan, Athens would only be allowed to carry out normal state spending after servicing its debt, the FT said.

"If a future (bail-out) tranche is not disbursed, Greece cannot threaten its lenders with a default, but will instead have to accept further cuts in primary expenditures as the only possible consequence of any non-disbursement," the FT quoted the document as saying.

The German demands for greater control over Greek budget policy come amid intense talks to finalize a second 130 billion-euro rescue package for Greece, which has repeatedly failed to meet the fiscal targets set out for it by its international lenders.

CHAOTIC DEFAULT THREAT

Greece needs to strike a deal with creditors in the next couple of days to unlock its next aid package in order to avoid a chaotic default.

"No country has put forward such a proposal at the Eurogroup," a Greek finance ministry official said on condition of anonymity, adding that the government would not formally comment on reports based on unnamed sources.

The German demands are likely to prompt a strong reaction in Athens ahead of elections expected to take place in April.

"One of the ideas being discussed is to set up a clearly defined priorities on reducing deficits through legally binding guidelines," the European source said.

He added that in Greece the problem is that a lot of the budget-making process is done in a decentralized manner.

"Clearly defined, legally binding guidelines on that could lead to more coherence and make it easier to take decisions - and that would contribute to give a whole new dynamic to efforts to implement the program," the source said.

"It is clear that talks on how to help Greece get back on the right track are continuing," the source said. "We're all striving to achieve a lasting stabilization of Greece," he said. "That's the focus of what all of us in Europe are working on right now."

(Reporting By Noah Barking; Additional reporting by George Georgiopoulos in Athens and; Adrian Croft in London; writing by Erik Kirschbaum; editing by Andrew Roche)

[Caliga]

I look forward to the coming offensive through the Monastir Gap.

[mongers]

I look forward to the coming offensive through the Monastir Gap.

Is that a euphemism for something I really don't want to know about ? 

[Viking]

I look forward to the coming offensive through the Monastir Gap.

Is that a euphemism for something I really don't want to know about ? 

http://en.wikipedia.org/wiki/Battle_of_Greece

I was going to aski if the Germans named the plan "Unternehmen Marita".

[Sheilbh]

The Greek Finance Ministry's statement on this:
http://www.minfin.gr/portal/en/resource/contentObject/id/614dc602-4d71-45df-9bf9-a6cb85c13940

Anyone who puts a nation before the dilemma of 'economic assistance or national dignity' ignores some key historical lessons. I am certain that the political leaderships of all European nations -particularly bigger nations that bear increased responsibility for the course of Europe- are aware of how friends and partners, who have joined their historical destinies, raise questions.

[The Brain]

Would Greek law allow this?

[Zanza]

I think it would be much better if Greece just defaulted and then could freely choose its policies in or outside the Euro. Financial help is not worth giving up sovereignity to such a high degree. It's fair game for creditors to suggest reforms or privatizations, but in the end, Greece should remain sovereign in its own affairs and set the policies it thinks make sense. If you send foreign administrators in, you have really crossed the Rubicon in my eyes. That's the end of the Hellenic Republic and the birth of a European Empire.

[Neil]

For a country in the EU to cry national sovereignty is foolish.

[Sheilbh]

According to the FT hack who broke this, it wasn't meant just for Greece.  These special measures could be used in other debtor countries (probably Portugal next?) which seems mad.

Similarly the FT story that there were talks about Merkel campaigning with Sarkozy is incredible and delusional if true.

[Iormlund]

For a country in the EU to cry national sovereignty is foolish.

Not really. National sovereignty is paramount in the EU. And that is precisely the problem.

I wouldn't mind Merkel (well preferably someone else with brains) guiding the destiny of Spain as President of the EU or whatever after being elected by a majority of Europeans.
But that's not the case. She's doing it as Chancellor of Germany.

[dps]

Just having a common currency involves giving up some sovereignty.  Actually making that currency workable in the long term would involve giving up more.

[Darth Wagtaros]

This is why the Greeks should have been passed over in favor of the Turk.

[derspiess]

Having mom & dad help you with your finances does come with some strings attached.  The Greeks could do a lot worse than having Germany manage their budget. 

[Iormlund]

The Germans don't want to help manage Greek finances. That would be fine.

[Sheilbh]

Just having a common currency involves giving up some sovereignty.  Actually making that currency workable in the long term would involve giving up more.

Indeed.  But I don't think it's entirely fair to pool fiscal sovereignty without pooling debts.  This proposal is, I think, workable if it goes for all Eurozone states and there's Eurobonds being issued (a la Hamilton assuming the states' debts) but not the way this is described.  As Iorm points out it would have to be a Eurozone fiscal policy, which could look rather different to a German fiscal policy.

Having mom & dad help you with your finances does come with some strings attached.  The Greeks could do a lot worse than having Germany manage their budget.

They've had EU support collecting taxes over the past year and apparently it's had an extraordinary effect in increasing revenues.  Again that's something the EU should do more of with Greece, there's far too many small businesses and old school tax offices (they're not computerised, as in some offices don't have computers) which makes so much room for corruption.  The EU should help them modernise the state.