Bloomberg News

Euro Officials Said to Discuss Veto Powers Over Greek Budget

January 29, 2012

(Updates with Greek government comment fourth paragraph, European Commission comments from fifth.)

Jan. 28 (Bloomberg) -- European policy makers are discussing plans to directly intervene in Greek budget decisions as the country struggles to cut its deficit, two euro-region government officials said today.

Under the proposals, European institutions would have powers to implement austerity measures agreed under the terms of Greece’s bailout agreements, said one of the officials, who declined to be identified because the talks are confidential. The plan would accelerate decision making and strengthen the power of officials overseeing Greece’s budget as part of the so- called troika of the European Commission, the European Central Bank and the International Monetary Fund, the person said.

European leaders meet in Brussels on Jan. 30 as they draw up a fiscal compact to strengthen governance of the euro region after Greece sparked a wave of financial turmoil that still threatens to splinter the bloc. With Greece struggling to meet the terms of bailout agreements struck over the past two years, European officials are trying to work out how to deal with countries that can’t meet the terms of bailout agreements.

The Greek government rejects the plan because it’s contrary to national sovereignty, a Greek official said today. A German finance ministry spokesman declined to comment. The French finance ministry didn’t immediately return a call seeking comment.

Executive Tasks With Greece

The European Commission said today that executive tasks must remain the full responsibility of the Greek government.

“That responsibility lies on their shoulders and it must remain so,” commission economics spokesman Amadeu Altafaj said in an e-mailed statement. “The Task Force on technical assistance set up by the commission continues to support the Greek authorities in a number of key areas to reform and optimize public administration, among other crucial tasks.”

It also said, “The commission is committed to further reinforce its monitoring capacity and is currently developing its capacity on the ground.”

The Financial Times earlier today reported that Germany is proposing the creation of a commissioner, appointed by euro- member states, with power to veto budget decisions by Greece as a condition for its second bailout agreement.

The proposal is likely to spark controversy in Greece as politicians gear up for an election that may take place in April. Nine in 10 Greeks are unhappy with the performance of Lucas Papademos’s interim government, according to a poll published by Skai TV and the newspaper Kathimerini on Jan. 15.

Elections Near

The main opposition New Democracy Party, led by Antonis Samaras, had 30.5 percent support and the socialist Pasok party had 14 percent. Backing for both the Communist Party of Greece and the Coalition of the Radical Left was around 12 percent, the poll showed.

The Greek government is currently locked in talks with bondholders, who agreed three months ago to implement a 50 percent cut in the face value of more than 200 billion euros ($264 billion) of debt. A worsening economy since then has made it more difficult to achieve a goal of cutting Greece’s debt to 120 percent of gross domestic product by 2020. An accord with bondholders is tied to a second bailout from Greece’s European partners and the IMF for the country, which faces a 14.5 billion-euro bond payment March 20.

Greece now requires 145 billion euros as part of its second aid package, 15 billion euros more than was agreed in October, Der Spiegel reported today, citing an unidentified official from the troika in Greece.

--With assistance from Andrew Clapham in Brussels. Editors: John Fraher, Dick Schumacher.

To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net Maria Petrakis in Athens at mpetrakis@bloomberg.net.

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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