Brussels - Desperate times breed desperate measures, and
right now the European Union is really worried about what Greece's
economic woes are doing to the credibility of the euro.
The bloc's executive on Wednesday announced the toughest
monitoring system it has ever imposed on a member state, giving it an
unprecedented degree of control over national spending.
'This is not the EU jumping into the (Greek) driving seat, but at
the very least, it's the police escort,' Carsten Brzeski, eurozone
analyst at ING bank in Belgium, told the German Press Agency dpa.
In the autumn, the newly-elected Greek government announced that
its predecessor had grossly misstated its budget deficit for 2009.
The official figure stood at 3.5 per cent of gross domestic product
(GPD), the revised number at 12.7 per cent.
The confession sparked a storm on financial markets which reached
well beyond Athens. By mid-January, the euro itself was under
pressure as fears spread that not just Greece, but other euro members
such as Portugal, might be forced to default on their debt.
The single currency has fallen by 8 per cent against the dollar
since December.
With those fears circling, EU Economic and Monetary Affairs
Commissioner Joaquin Almunia was in no mood to trifle as he announced
the European Commission's response to the crisis.
'This is the first time we have established so intensive and
quasi-permanent system of monitoring, but it is needed, given the
circumstances,' he said.
The bulk of the commission's report dealt with the savage
cost-cutting measures which the Greek government has proposed.
The programme already includes measures such as a civil service
wage freeze and excise hikes on fuel, alcohol and cigarettes, but
Almunia stressed that the commission would demand still more measures
if necessary.
'Every time we observe slippages, we will ask the Greek
authorities to adopt additional measures,' he warned.
Simultaneously, the commission demanded that Greece, like a
schoolboy put on probation, present detailed public reports every
three months on how it is implementing its measures - the first time
the commission has ever gone so far.
It adds up to 'probably the toughest report the commission has
ever released,' said Rainer Guntermann, an economic analyst with
Germany's Commerzbank.
Analysts said that the commission's hardline stance was the only
way to quell market concerns over the stability of Greece and the
euro, amidst persistent rumours that the country would only be kept
from default by a European or international bail-out.
'Times are desperate for Greece, and possibly even for the
eurozone: there are few alternatives at this stage,' said Guntermann.
They also predicted that the commission report would be welcomed
by the Greek government, amidst expectations that the reform package
will trigger massive opposition from trade unions.
'The stronger the recommendations, the more ammunition the
government has, so at least it can keep its back straight,' Brzeski
said.
But that support is likely to be a two-edged sword. Experts stress
that there is no easy way for the Greek government to solve its
problems, with years of painful belt-tightening ahead.
'Consolidation will take, not quarters, but years ... You have to
give Greece some time to let actions follow words,' Guntermann said.
And with the EU now keeping its eyes on every move Athens makes,
the Greek government has no choice but to press ahead with its
reforms - no matter how much protest they cause.
'This is a one-way street. There is no possibility of a U-turn
here: it's going to be painful,' Brzeski said.
Your Talkback on this Story