Commission waits on Greek progress report

Country’s deficit Greece’s may be almost five times larger than allowed under the stability and growth pact.

Greece will provide the European Commission with a multi-annual plan for repairing its battered public finances by “about” 15 January, according to a Greek official. 

The Commission is eagerly awaiting the report, which it needs to study before drawing up a recommendation on how much time Greece should be given to bring its deficit back within acceptable limits.

Estimates suggest that Greece’s deficit may have reached 14.5% in 2009, almost five times larger than the 3% allowed under the EU’s stability and growth pact.

The Commission predicted in November that the deficit would reach 12.7%, but a fall in tax revenues towards the end of the year has raised anxieties that the actual figure may be higher.

Giorgos Papaconstantinou, Greece’s finance minister, said on Tuesday (5 January) that Greece would bring its deficit to within 3% by 2012, an advance on the target of 2013 announced by George Papandreou, Greece’s prime minister, in December.

Greece’s parliament on 24 December adopted an ‘austerity’ budget for 2010, which the government claims will reduce the deficit to 9.1% in 2010 through tax increases and spending cuts.

Preparing a plan

Juergen Kroeger, a director in the Commission responsible for surveillance of national economies, and João Nogueira Martins, an expert on Greece in the Commission’s directorate-general for economic and financial affairs, travelled to Athens yesterday (6 January) to help the Greek authorities prepare the plan.

The finalised plan will be discussed at a meeting of eurozone finance ministers on 18 January.

The Commission will then present a recommendation on how long Greece should be given to bring its deficit within 3%, before eurozone ministers meet again on 15 February.

The ministers would take an informal decision on the deadline at the February meeting, which would then be rubber-stamped the following day at a meeting of finance ministers from all 27 EU member states. Ministers may also ask Greece to submit regular progress reports. The Commission is planning to present a report on Greece’s progress in the summer.

Getting tough

If Greece’s efforts over the following months are considered inadequate by other member states, further measures could be taken under the stability and growth pact. They include inviting the European Investment Bank to reconsider its lending policy to Greece, requiring the country to deposit money with the Commission that would be reimbursed when the deficit is corrected, or even imposing fines. None of these measures have been taken since the pact was created in 1997.

An earlier deadline of 2010 that ministers gave to Greece in April last year has lapsed, since it was decided on the basis of flawed statistics from the Greek government, which estimated that the deficit in 2009 would be 6%-8%.

Last December, finance ministers agreed that the country’s efforts to control its budget deficit and meet the 2010 target had been “insufficient” – a necessary legal step before the revised deadline could be adopted.

Only three member states (Greece in 2005, Germany in 2006, and France in 2003) have ever been given a revised deadline because of failure to meet the first one they were set.