THE Greek economy was put under permanent surveillance by the European Union yesterday in a new measure to ensure the state gets its finances under control and prevents danger to the euro.
Economics Commissioner Joaquin Almunia warned that if Greece does not make the spending cuts it has promised, and if their actions do not reduce their deficit as specified, the EU will demand further action.
The announcement boosted the value of the euro that had fallen to a six-month low last week as Greece’s problems unfolded. The bond market also reactively positively, reducing the yield on Greek bonds.
This is the first time the union has taken such an aggressive stance against a member state using new powers under the Lisbon Treaty. They also announced action against Greece over incorrect data issued by their statistics office that gave a false picture of the extent of the country’s problems.
Greece is running a budget deficit of 12.7% of its GDP and has introduced cuts in public service wages, pensions, health services and increases in tax to reduce it to 3% by 2012. It has also accumulated a massive debt of 113% of GDP.
Mr Almunia, who leaves the job in the next few days, said the commission believes the Greek programme of measures can achieve its objective but warned that if there was any slippage the EU would insist on further measures to return to the timetable.
“We have established in our programmes a very, very detailed and permanent system of monitoring and surveillance… The detailed list of measures will be monitored from day one after the Ecofin and Eurogroup [ministers] meeting adopt this,” he said.
The first deadline will be March 16, the second on May 16 and after that there will be an assessment every three months to see if measures are being adopted and reaching the targets.
When asked about a bailout through euro bonds, Mr Almunia made it clear that it was up to the Greeks to bail themselves out by taking the tough medicine, not just on their spending, but also to reform pensions, healthcare, labour market and other product and service market reforms.
“It is extremely challenging, but absolutely necessary,” he said. He ruled out intervention by the IMF.
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