Impatient lenders give Greece inspectors teeth

Born in Britain to Italian and Belgian parents, EU migration expert Francesca Nastri likes to say she?s a true European.

?I cross Europe?s north-south divide,? she joked this week in her office in the Greek capital, Athens.

But these days it takes more than common heritage to bridge the divide between Europe?s rich north and its financially troubled south.

Nowhere is that gap wider than between Greece, probably the continent?s most profligate country, and northern nations led by Germany which are funding most of its huge bailout and want to know they are not throwing good money after bad.

Nastri is one of a small team of officials despatched by the European Union to debt-laden Greece to do exactly that.

Originally sent to offer ?technical assistance?, they are now the vanguard of what is shaping up to be an unprecedented experiment in how the EU monitors the affairs of one of its own.

Trust that Greece will deliver on its promises of reform and austerity, set by lenders as the price of rescuing it from bankruptcy, is at rock bottom.

Under the latest EU/IMF rescue endorsed by Greece?s euro zone partners this week, inspectors will have unprecedented rights to inspect the country?s finances and its efforts to reform with a permanent, beefed-up mission based in Athens.

EU monitoring of Greece started with the technical assistance across the spectrum of government.

Nastri is one of 47 staff, with little more than a dozen currently in Athens and the rest making regular visits from Brussels to help the country in delivering the reforms.

The 40-year-old transferred her skills from the Belgian civil service last year to help the government overhaul procedures for handling migrants and asylum seekers, and to make best use of the considerable EU funds available to do it.

Nastri described her job in terms of flowcharts and spreadsheets – tasks that are ?obvious, time-consuming? – helping ministries to hit deadlines and juggle staff under a hiring freeze to keep costs down.

Speaking in an interview, she said her team was helping to share Greece?s burden of reform, rather than leaving Athens to do the job on its own. ?We can help,? she said. ?Of course, the Greek authorities can do it, but then we?re back at square one – they have to do everything (themselves).? A senior finance ministry official said two or three experts from the ?Task Force? were training staff in the general accounts office and in detecting tax evasion, which is a major problem in Greece. ?There are problems of know-how,? he said, on condition of anonymity.

Officials in Brussels and within the task force are tight-lipped about the details of the expanded monitoring, saying they are still being worked out.

Dutch Finance Minister Jan Kees de Jager, one of Greece?s strongest critics, spoke on Thursday of ?measures to promote discipline and implementation of the package?.

Greeks have decried the agreement as an attack on national sovereignty but to its lenders, the rationale is simple: It?s no good throwing 110 billion euros ($146 billion) at Greece in 2010, and another 130 billion now, without urgently tackling the fundamental flaws in the system that allowed Greece to accumulate its debt mountain.

This means reforming the pension system, privatisating firms still in state hands, cutting Greece?s massive public sector workforce and liberalising closed-shops professions such as truckers, pharmacists and taxi drivers – all in a bid to improve competitiveness and stimulate economic growth.

?The task force is very much in the driving seat in taking forward the implementation of administrative reforms with Greek colleagues,? said Caroline Varley, author of a damning report on the Greek public administration.

Varley?s December 2011 report for the Organisation for Economic Cooperation and Development (OECD) described a top-heavy structure dominated by senior civil servants, poorly coordinated and permeated by ?rent seeking and clientelism?.

?There is no systematic record-keeping and a chronic lack of factual evidence and data,? it said.

?This has been going on now for the 35 years or so since the end of the dictatorship,? Varley told Reuters, referring to Greece?s military rule from 1967 to 1974. ?There have been some limited reforms but they have never been fully carried through.? Wolfgang Schauble, the finance minister of EU paymaster Germany, set the tone earlier this month when he compared Greece with a ?bottomless pit?.

The comment was part of a flurry of acrimonious exchanges between Athens and Berlin, and reflected deepening doubts among mainly northern members of the 17-nation euro zone about Greece?s ability and willingness to change the way it works.

After 13 hours of negotiation in Brussels, finance ministers of the euro zone approved the rescue package on Tuesday, including a deal for private creditors to take a real loss on their Greek government bonds of 73-74 percent.

The bailout saves Greece from bankruptcy on March 20, when 14.5 billion euros in debt repayments fall due.

It came at a price. The task force will become an ?enhanced and permanent? presence in the Greek capital.

It should have ?stronger on-site monitoring capacity?, the text of the bailout deal said, to help Greece?s lenders ?in assessing the conformity of measures that will be taken by the Greek government, thereby ensuring the timely and full implementation of the programme?.

The deal also involves the creation of a ringfenced account where Athens will have to deposit funds to service its debt in order to guarantee repayments.

To many Greeks, it is the latest humiliation after years of being portrayed by critics as workshy and wasteful.

?It?s as if we don?t have in Greece educated and able people to govern the country,? said fruit trader Raptis Michalis. One Greek politician called it ?degrading?.

The threat of bankruptcy has already dented national pride, and Greeks are angry at seeing their wages, pensions and jobs culled at the demand of leaders in Brussels. Taxes are spiralling, as is unemployment.

Ben May of Capital Economics described the issue as ?potentially explosive? for an election pencilled in for April when fringe blocs are expected to make big gains over the two parties currently in government.

The Greek finance ministry official said that ?monitoring and information-collecting is fine?, but the government would draw the line at decision-making powers. ?We are fully transparent. There are no secrets,? he said. [Reuters]