The President of the Euro Group, Jean-Claude Juncker, speaking after the monthly meeting of the 16 Eurozone finance ministers, said the agreed sequence of events will be as follows:
On 16 March, the Greek Government is to send the European Commission and the European Central Bank a report about progress made this month. Greece has pledged to reduce its budget deficit by 4% of GDP in 2010, from 12.75% to 8.70%, and to cut it still further to below 3% in 2012, in line with the European Stability and Growth Pact.
If the EU executive body and the ECB consider that the country has not made sufficient progress, they will start talks on imposing additional measures on the Greek Government and will make a formal proposal, which will be submitted to the Euro Group.
At this point, the finance ministers of the Eurozone would be able to impose additional public finance consolidation measures on the Greek Government, which would be done by a qualified majority vote with Greece barred from participating.
If nevertheless Greece continues to be battered by the markets, “the members of the Eurozone are committed to taking decisive and coordinated measures to preserve financial stability throughout the Eurozone", Juncker stressed.
Juncker also welcomed the new Commissioner for Economic and Monetary Affairs, Finland's Olli Rehn, who takes over from Spain's Joaquín Almunia.
Rehn pledged to present a proposal within the next few months for increasing coordination between economic policies within the Economic and Monetary Union, with the aim of reducing inequalities in macroeconomic aspects and competitiveness between Member States, which have led to situations such as that of Greece.
The Ecofin Council urges Greece to apply an “ambitious package” of structural reforms
The Vice-President of the Government of Spain and Minister of Economy and Finance, Elena Salgado, chaired an Ecofin Council meeting attended by European Finance Ministers, which focused mainly on the economic situation in Greece, and decided that a strong adjustment of its budget deficit was needed, with wide-ranging structural reforms to be applied.
The Ecofin Council expressed its support for the Greek Government's decision to reduce its deficit by 4 points in 2010, from 12.75% of GDP to 8.7%, and below 3% by 2012.
Elena Salgado reiterated that “if necessary Greece will receive any aid it requires and that is our firm commitment”, although she added that the Greek Government had yet to request any financial aid.
The recommendations made to the Greek Government included immediate measures, starting this year, to put together and implement a package of global structural reforms, with specific measures concerning public wages, pensions, the healthcare system, public administration, markets, the improvement of the business climate, and increased productivity and employment.
The Spanish minister emphasised that for the first time the Council of Europe has resorted to an article in the treaty that allows the EU to send a warning to a member state whose economic policy does not conform to Europe's macroeconomic directives. A team of experts from the European Commission, the European Central Bank and the International Monetary Fund will travel next week to Athens to advise the Greek authorities on applying the recommendations, according to European Commissioner for Economic and Monetary Affairs, Olli Rehn, who joined Elena Salgado at the press conference after the Ecofin Council meeting.
Rehn announced the launch of infringement proceedings against Greece for manipulating statistics on the state of its public finances, while Eurostat, the European statistics body, requested information on operations in currency markets and derivatives, which may have facilitated the discrepancies in the Greek budget deficit and public debt.
When asked if Spain had resorted to derivatives deals to mask public debt, Elena Salgado answered with a categorical "no”.
When asked whether the Spanish authorities had received a proposal from Goldman Sachs to use cross-currency swaps, as Greece is said to have done, Elena Salgado answered “no, absolutely not”. “If any such proposal had been received it would not have been accepted”.
The Commissioner for the Internal Market and Financial Services, Michel Barnier, also indicated in the press conference that “the crisis is not over and we must regulate the financial market” to make it more robust, through comprehensive and efficient oversight, by putting in place mechanisms to prevent crisis situations in the future and including flexible tools for the banking sector.
By: N. Peter Kramer
