Greece under close EU oversight

Greece will come under «strengthened supervision» from the European Commission and its fellow members of the eurozone after revealing much higher budget deficits for the period since 1997, including a 1999 deficit that, if revealed back then, would have precluded its acceptance into the eurozone in June 2000. Since the EU’s ability to punish past transgressions is limited, the focus should be on what to do from now on, Luxembourg Prime Minister and senior eurozone spokesman Jean-Claude Juncker said at the end of a meeting of EU finance ministers (Ecofin) yesterday. «I think we now have to put Greece under strengthened supervision. It’s the only possibility I see,» he said. «In politics, we should not look to the past, but to the future. The most important thing is to prevent that such things ever happening again,» agreed Austrian Finance Minister Karl-Heinz Grasser said. «Sanctions for the past? I don’t think that makes sense,» he added. The ministers’ attitude was also shaped by the fact that deep internal dissensions exist over the applicability of the Stability and Growth Pact, which provides a regulatory framework for eurozone participants. Complaints about the rigidity of the rules, their open breach by the largest eurozone members, France and Germany, and the inability of the European Commission to impose sanctions for excessive deficits, have led to a debate on whether the pact should be amended. Ecofin, in fact, agreed yesterday to postpone debate on reform to next year. In the end, European finance ministers decided to urge Greece to take «corrective measures» to cut the budget deficit, which is expected to reach at least 5.3 percent of the country’s GDP in 2004. Policy recommendations will follow in January, after the Commission has reported on Greece’s 2005 budget. While Economy and Finance Minister Giorgos Alogoskoufis chose to present this as a «vote of confidence» on the Greek government, former Socialist Prime Minister Costas Simitis, who governed from January 1996 until the present government was elected last March, angrily denounced his successors for a politically motivated change in accounting methodology that inflated deficits. «There was a change in methodology in the recording of expenditure and it was done maliciously (by New Democracy) and with thoughtlessness by the government,» Simitis said in a television interview where he hit back at charges that Greece had wormed its way into the eurozone using bogus figures. Simitis’s two finance ministers, Yiannos Papantoniou and Nikos Christodoulakis, said yesterday that the revised figures were a ploy by the current government that would enable it to renege on its extravagant pre-election promises. «Mr Simitis and his governments for years fooled not only Greek citizens but the EU as well, using creative accounting. Lies embarrass the country, not the truth,» countered government spokesman Theodoros Roussopoulos. Bank of Greece Governor Nicholas Garganas joined the fray yesterday. In an interview to the Financial Times, he said there was no deceit. «I don’t think the people of Greece and Europe were misled. It is not really fair to draw such conclusions when we know that since 2000 the method of preparing or calculating budget deficits has changed,» Garganas said.