GREECE REJECTED speculation yesterday that it would need a bailout to tackle its swollen budget deficit as officials flew in from Brussels to scrutinise the government’s tax and spending plans.
“We don’t expect to be bailed out by anybody, as I think it’s perfectly clear we’re doing what needs to be done to bring the deficit down and control the public debt,” finance minister George Papaconstantinou said.
His comments came after Jürgen Stark, a European Central Bank executive board member, said there would be no bailout for the country by other members of the euro zone. “The markets are deluding themselves when they think, at a certain point, the other member states will put their hands on their wallets to save Greece,” he told Italy’s Il Sole 24 Ore newspaper.
Mr Stark is one of the euro zone’s most hardline conservative policymakers, and a decision on any rescue package would be taken by politicians rather than the ECB – although the ECB might have a role in advising on the conditions imposed on Athens.
“I’m very confident that, were help to be needed, it would be there because there’s so much at stake for the euro area,” said Jacques Cailloux, euro zone economist at RBS. “If there was a contagion crisis that threatened the euro zone or the periphery, then the ECB would have the right to intervene.”
Mr Papaconstantinou called Mr Stark’s comment “not helpful”.
“[Greece] has announced a very ambitious and determined fiscal consolidation programme aimed at reducing the deficit by 4 percentage points . . . in 2010 and bringing it below the 3 per cent threshold in 2012, one year earlier than previously planned,” he said.
The government’s broad outline of how it will get out of its fiscal mess has not impressed markets, making the talks with Brussels on the details of a long-term budgetary plan Greece must submit by end-January a sensitive point for investors.
But Mr Stark’s comments highlighted the policy of “constructive ambiguity” being followed by Europe’s leaders in their dealings with Greece – in which they have been deliberately vague about what would happen if the worst came to pass, in order to maintain the pressure for fiscal reform.
The message has not been lost on Greek policymakers, who scrambled to update the country’s draft economic plan ahead of the EU team’s arrival yesterday and accelerate the adjustment process. They said Greece was committed to cutting the budget deficit from 12.7 per cent to 3 per cent of gross domestic product – the euro zone limit – by the end of 2012, a year earlier than planned.
A senior finance ministry official said the team from the European Commission and the ECB would quantify measures outlined in the draft plan to boost revenues and curb spending. “Institutional reforms will also come under scrutiny, including legislation to make the statistical service independent,” the official said.
Commission officials grew infuriated with the Greek practice of sending misleading statistics to Brussels. Last year’s deficit was almost double the estimate made last July by the previous government. – (Copyright The Financial Times Limited 2010 / Bloomberg)
