News Update :

Germany wants the EU to control the Greek budget

Saturday, January 28, 2012

The source added that the proposals of the European institutions already operating in Greece should be given "some power of decision" on fiscal policy.
  
Germany is pushing for Greece to relinquish control of its budget policy to the European institutions as part of discussions on a rescue package secondly, an EU source told Reuters on Friday.
"There are internal discussions within the Euro Group and proposals, one of which comes from Germany, how to deal constructively with national aid programs that are continually out of track, if this can be simply ignored or if we say that is enough, "said the source.
The source added that the proposals of the European institutions already operating in Greece should be given "some power of decision" on fiscal policy.
"This could be made even more harshly by external experts," said the source.
The Financial Times said it had obtained a copy of the proposal showing Germany wants a new euro area, "Budget Commissioner" to have veto power over budget decisions taken by the Greek government if they are in line with the objectives by international lenders.
"Given the disappointing performance so far, Greece has to accept change budgetary sovereignty at European level for a period of time," said the document.
According to the German plan, Athens only be allowed to carry out the normal state spending after debt service, said the FT.
"If the future (rescue) tranche is disbursed, Greece can not threaten its creditors with a default value, but will have to accept cuts in primary spending as the only possible consequence of any disbursement not," the FT quoted the document as saying.
German demands for greater political control over the Greek budget comes amid intense negotiations for one second to EUR 130 billion rescue package for Greece, which has repeatedly failed to meet the fiscal targets set for it by its creditors international.
Chaotic default threat
Greece needs to reach an agreement with creditors over the next couple of days to open your next package of aid to avoid a chaotic default.
"No country has submitted a proposal in the Eurogroup," said a Finance Ministry official Greek condition of anonymity, said the government formally declined to comment on reports based on unnamed sources.
German demands tend to provoke a strong reaction in Athens before the elections scheduled for April.
"One of the ideas being discussed is the creation of a clearly defined priorities in reducing the deficit through legally binding guidelines," the EU source.
He added that in Greece the problem is that many of the budgeting process is done in a decentralized manner.
"Clearly defined, legally binding guidelines that could lead to greater consistency and facilitate decision-making - and which help to give a new momentum to efforts to implement the program," said the source.
"It is clear that the talks on how to help Greece get back on track on the right continues," the source said. "We're all trying to achieve a long-term stabilization of Greece," he said. "That is the focus of what all of us in Europe are working on right now."
Reuters
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