THE PROSPECT of an EU intervention in the Greek economy drew a step closer when European finance ministers endorsed a 28-day deadline imposed on its government to show that its budget plan is yielding dividends.
With European Central Bank president Jean Claude-Trichet pushing hard for Athens to adopt new budget measures, finance ministers in the wider union backed demands from euro-area ministers for fresh cuts and taxes in four weeks if the current plan is shown to have misfired.
The manoeuvre gave Greek prime minister George Papandreou some breathing space, although Germany, Austria and Sweden are already calling for fresh austerity measures.
The EU ministers have reserved the right to impose new austerity policies on Greece by invoking a clause in the Lisbon Treaty that would deprive Athens of a vote on new measures proposed by the European Commission.
Minister for Finance Brian Lenihan suggested yesterday that he would be likely to vote with the commission. “The Government would certainly attach considerable weight to the recommendation of the commission in any such vote,” he told reporters in Brussels. “Clearly I’m not going to pre-commit how I will vote.”
Pressure on Mr Papandreou follows signs that the performance of the Greek economy was weaker than projected in last quarter of 2009, dimming the potential impact of measures already in train to bring its deficit under control. This has fanned concern among the European authorities that Mr Papandreou’s administration is “bluffing” its austerity programme.
“To the extent that a number of risks associated with the specified deficit and debt ceilings materialise, Greece shall announce, in the report to be presented by 16 March 2010, additional measures to ensure that the 2010 budgetary target is met,” the finance ministers said in a communiqué.
Less than a week after the European authorities pledged exceptional aid to Greece “if needed”, it also reflects growing resistance in Germany and the Netherlands to any bailout.
While German chancellor Angela Merkel signed up to the conditional pledge of support for the country, informed sources say her administration is “wavering” as a result of public opposition and dissent in her coalition.
Mr Lenihan said the idea of every other EU member state having to pay for reckless Greek behaviour had not generated much of a backlash in Ireland. “But it’s clear that such a backlash has already materialised in Germany and the Netherlands,” he said.
German deputy finance minister Jörg Asmussen said yesterday that “additional measures by Greece are needed”, while Austrian minister Josef Proell said pressure on Athens to consider further measures “has clearly increased”.
These views were echoed by the Swedish minister, Anders Borg, who said “what we have seen so far is not enough”. More taxation and expenditure measures were required, “if they want to build credibility in the market”.
Mr Lenihan declined to disclose what bailout mechanisms are under discussion.
“Clearly when you spell out the instrument you assume that you’re at that contingency. There’s still an opportunity for Greece herself to fund herself on the basis of firm corrective action by the Greek authorities themselves,” he said.
“The point was made by others that, if you take the case of Ireland last year, Ireland managed to put herself in the position where she could fund freely on world markets.”
The Greek government’s problem was that it was seeking to extract cuts worth 4 per cent of GDP this year, he said.
“I was present at a meeting with the former minister for finance in Greece where he used the same arguments that have been used at home to oppose the Government’s policies: that the social partners should have a veto; that there should be no reductions in public service wage rates; that the markets would lend Greece money in any event.”
