Eurozone finmins have 'little patience for Greece' over budget deficit
Euro zone finmins have little patience left for Greece after it repeatedly mislead them about the size of its budget deficit, sources said.
Euro zone finance ministers have little patience left for Greece after it repeatedly mislead them about the size of its budget deficit and would be ready to impose sanctions on Athens if needed, euro zone sources said.
Ministers from the 16 countries using the euro will discuss the unreliable Greek statistics on Monday after a European Commission report showed Greece had for years deliberately misreported budget deficit data because the statistics system was open to political influence.
"People are very angry indeed and so there is limited willingness around the table to do anything for them unless they do very many things," one source involved in the preparation of the euro zone ministers meeting, the Eurogroup, said.
A revision of Greek deficit data for 2008 to 7.7 percent from 5.0 percent of GDP and a three-fold increase in the forecast for the 2009 deficit to 12.7 percent of GDP by the new Greek government triggered ratings downgrades of debt and market speculation that the euro zone might have to bail out Athens.
No appetite for Greek bailout
But there was no appetite for such action in the Eurogroup.
"We remain strongly convinced there will be no need of a bailout. But if we are talking about bailouts, people around the table are also not politically suicidal," the source said.
"German taxpayers would have little patience if you tried to tell them you are using their money to bailout a country that has consistently and knowingly reported wrong data and has repeatedly infringed EU budget rules," the source said.
"So the Greeks should be aware that not only patience is wearing thin, but also that there are certain basic democratic parameters that are difficult to control in this debate. They need to get their act together," the source said.
Euro zone ministers will listen on Monday to a report by the European Commission and European Central Bank officials on the results of their mission to Greece last week, where they went to help Athens design a realistic, long-term deficit cutting plan.
Following these consultations, Greece announced on Thursday it would cut its budget deficit to 2.8 percent in 2012 -- a plan many economists see as very ambitious.
"The Commission is very positive about the finance minister (George Papaconstantinou), about his willingness to introduce reforms. Other parts of the government appear to see this completely differently. This is as was of course to be expected," a second euro zone source said.
How reliable are the new promises
Greece formally sent its deficit cutting plan to the Commission on Friday and the EU executive arm will study it but it was not clear when it would have ready its opinion on the scheme. Sources said however, it was difficult to trust a plan that might be based on unreliable statistics.
"How can you discuss their new programme if you are still unsure about the statistics that are behind it?" a third euro zone source involved in the preparation of the meeting said.
"That annoys a lot of people. You need first to be sure about the data that we are basing everything on, and then discuss the programme," the source said.
Neither are euro zone officials sure if Greece will deliver on its promises.
"They cheated their way into the euro zone, they cheated their way out of the excessive deficit procedure -- they have a credibility problem," a fourth source said. "In the past they said very often the very same things as now, and nothing happened afterwards."
The Eurogroup will therefore no longer take Greek promises at face value. "On past experiences everybody has adopted an attitude that we need to put pressure on them and judge them by their execution not by their plans," the second source said.
The Eurogroup message to Athens will be clear.
"Greece will have to do 100 percent of what they promised. 95 percent will not do," the third source said.
"It is not just about Greece. It is about the credibility of the whole Stability and Growth Pact," the third source said referring to the EU's budget rules that limit government borrowing to underpin the common euro currency.
Mood for fines
On a recommendation that will be prepared by the Commission, the ministers will give issue recommendations to Greece at the mid-February meeting, after which Greece will have four months to comply with the requested steps.
If after the four months a Commission assessment finds that Athens did not follow the ministers' advice regarding deficit reduction, Greece could become the first country in the EU to see sanctions imposed on it for fiscal policies.
"There is an implicit willingness to create a precedent," the fourth source said. "Greece is a good case for that. If they don't respond to those recommendations then the next step is the fine. No one is speaking out for them."
"One needs to pile on pressure from a multitude of sources, there are even possibilities of withholding funds from the cohesion fund. I think member states would be very willing to go along with that," the second source said.
Reuters Last Mod: 16 Ocak 2010, 12:08