Direct budget control suggested for Greece

Germany is proposing that Greece should temporarily cede sovereignty over tax and spending decisions to a powerful eurozone budget commissioner before it can secure further bailouts, an official in Berlin said today.

The initiative is being discussed among the 17-nation currency bloc's finance ministers because Greece has repeatedly failed to fulfil its commitments under its current multi-billion pound lifeline, the official said.

The European Commission said later that “executive tasks must remain the full responsibility of the Greek government, which is accountable before its citizens and its institutions”.

The proposal foresees a commissioner holding a veto right against any budgetary measures and having broad surveillance ability to ensure that Greece will set its priorities on repaying its debt as scheduled, the official said.

Greece's international creditors - the so-called troika of the International Monetary Fund, the European Union and the European Central Bank - are currently negotiating another €130bn rescue package for the heavily indebted country.

But German news magazine Der Spiegel today cited an unnamed troika official as saying that Greece might need a total of €145bn in its second bailout package amid the country's prolonged and sharp recession.

The German proposal, first reported by the Financial Times, is likely to spark controversy in Greece.

A powerful budget commissioner would further diminish the political leeway of Greece's government, just as politicians there are gearing up for an election set to take place this spring.

A government official in Athens said a similar proposal had been floated last year but got nowhere. Greece would not accept such a measure, he added.

The unprecedented and sweeping powers for creditors would indeed deal a huge blow to Greece's sovereignty, but they could help mobilise more support for the government in Athens from its European partners.

Several German MPs have repeatedly said that giving more money to Greece is unthinkable without stricter enforcement and control of the conditions attached to the rescue packages.

Greece is currently locked in a twin effort, seeking to secure a crucial debt relief deal with private investors while also tackling the pressing demands from its European partners and the IMF for more austerity measures and deeper reforms.

Failure on either front would force the country to default on its debt in less than two months, pouring new fuel on the fires of Europe's two-year-old debt crisis. In that case, Greece would likely leave the eurozone, which would bring disaster to the country, destabilise the currency bloc, fuel panic on financial markets and ultimately threaten the fragile world economy.

Despite two weeks of intensive talks, a debt relief agreement with private investors has yet to be reached.

Greek Prime Minister Lucas Papademos and Finance Minister Evangelos Venizelos resumed the talks with representatives of international banks and other private institutions in Athens today.

The debt writedown is meant to reduce the country's debt-to-GDP ratio from 160% last year to 120% in 2020, or about Italy's current level, and it is a vital condition for the second bailout package.

The meeting between Greek government leaders and private creditors on halving the country’s privately held debt load later ended without a final deal.

The participants did not issue statements after today’s session.

More talks are expected tomorrow.