Greece rejects Germany's EU budget veto

30 Jan 2012, 7:07 pm   -   Source: AFP
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The finance minister of debt-stricken Greece has rejected a proposal from Germany for the EU to take control over its tax and spend decisions, citing national sovereignty.

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The finance minister of debt-stricken Greece has rejected a proposal from Germany for the EU to take control over its tax and spend decisions, citing national sovereignty.

"Whoever hands people a dilemma between financial aid and national dignity is ignoring basic historical teaching," said Evangelos Venizelos on the eve of an EU summit on the eurozone debt crisis in Brussels.

In a statement released as he left for the meeting, Venizelos said: "Our partners know that European unification is founded on the institutional equality of member states and respect for national identity."

German Economy Minister Philipp Roesler had said he supported stricter EU monitoring of Greece, in an interview to be published Monday, after Athens dismissed calls for it to give up control over its budget.

Roesler told the daily Bild that the EU should step in to ensure that Greece toes the line on budget austerity, saying: "We need more leadership and monitoring in implementing the course of reform."

"If the Greeks fail to do this themselves, the leadership and monitoring must come in a stronger way from outside, for example via the EU."

And German Finance Minister Wolfgang Schaeuble made it clear Europe wanted more than just good intentions if it was to release a second bailout of 130 million euros ($171 million), negotiated in October.

"Unless Greece implements the necessary decisions and doesn't just announce them ... there's no amount of money that can solve the problem," he told the wall Street Journal.

The idea that Greece might cede budget control to the EU was contained in a German submission to its eurozone partners first revealed late Friday by the Financial Times and confirmed by European sources.

Under the radical plan, a commissioner appointed by the 16 other eurozone finance ministers could veto budget decisions made by Athens.

Greece is now trying to wrap up a deal with private investors -- including banks, insurance companies and investment funds -- who have been asked to take a "haircut" worth about half the money owed to them.

For Greece, agreeing on such a deal is a precondition for further bailout funds from the European Commission, the European Central Bank and the International Monetary Fund (IMF).

Athens faces a critical bond reimbursement worth 14.5 billion euros on March 20.

Under the Private Sector Involvement deal, the creditors are asked to accept a halving of the 200 billion euros in debt they hold. Talks have been snagged on the amount of interest to be paid on the remainder. Venizelos told reporters Saturday he was hopeful of a deal within days.

Prime Minister Lucas Papademos, meanwhile, said on Sunday there was "total convergence" among his political allies on new austerity measures needed for a second bailout and on debt cuts to avert default.

Papademos had sought agreement on the broad outlines of an accord with the private creditors, and the new recovery plan put forward by the EU and IMF.

He held talks with his Socialist predecessor George Papandreou, as well as Antonis Samaras, head of the centre-right New Democracy party, and far-right leader George Karatzaferis. Papademos said negotiations with the private creditors "are not easy" -- adding that "the partners want additional engagements and conditions" -- but stressed that if the talks failed, Athens "faced the spectre of default".

"We will together put up a hard fight to guarantee the country's place in Europe and the eurozone ... united we can succeed," he said.

The eurozone and the IMF are demanding this commitment, asking for it in writing, for the second time since November, so that Greece will stay on course through early elections to be held in the spring. Samaras, a longtime proponent of EU-IMF remedies, is tipped to win the polls.

The international troika of the European Commission, ECB and IMF is trying to make Greece's debt mountain sustainable by 2020.

They demand austerity measures and deregulation before they will agree to release the 130-billion euro second bailout. Among proposed measures are revising wages to boost competitiveness at a time when the economy is facing its worst recession in decades.

The troika is also asking for new cuts in social benefits and higher property taxes.

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