Greece's Prime Minister Lucas Papademos is seen in Athens
Πηγή: BusinessDay
By Bloomberg, Reuters
Jan 30 2012
Angry row ahead of summit as Athens rejects outside help.
GREECE yesterday angrily shot down a German proposal that it cede fiscal policy to a "budget commissioner" with veto powers, in a new row that could determine whether Athens receives further bail-out funds or whether it will be forced to quit the euro zone.
German Economy Minister Philipp Roesler yesterday became the first German cabinet member to openly endorse a proposal for Greece to surrender budget control, after European sources said on Friday Berlin wanted Athens to give up budget control.
Greece, which has repeatedly failed to meet the fiscal targets set out by its international lenders, is in discussions to finalise a second €130 bn package.
With many Greeks blaming Germans for the austerity medicine, officials in Athens dismissed the idea of relinquishing budget control.
The standoff between the two countries could prolong the search for a deal to save troubled euro-zone economies that are threatening to drag the global economy down with them.
Greek Finance Minister Evangelos Venizelos angrily rejected the proposal, saying the country was perfectly capable of making good on its promises.
"Anyone who puts a nation before the dilemma of ‘economic assistance or national dignity’ ignores some key historical lessons," he said before heading to Brussels for today’s European Union (EU) summit.
The Financial Times obtained a copy of the proposal showing Germany wants a new euro-zone "budget commissioner" with the power to veto budget decisions if they are not in line with targets set by international lenders.
"Given the disappointing compliance so far, Greece has to accept shifting budgetary sovereignty to the European level for a certain period of time," the document said.
Under the plan, Athens would be allowed to carry out normal state spending only after servicing its debt, the paper said.
Crushed by €350 bn of debt and running out of cash quickly, Greece is scrambling to appease the "troika" of its official lenders — the European Commission, European Central Bank and International Monetary Fund (IMF) — and stitch up a deal with private creditors simultaneously.
Greece needs to strike a deal with creditors in the next few days to unlock its next aid package in order to avoid a chaotic default.
A government source in Berlin said Germany’s proposal was aimed not just at Greece but also at other struggling euro-zone members that receive aid and are unable to make good on their obligations. The European Commission, the executive arm of the 27-country bloc, said it wanted Greece to maintain autonomy.
Greece was pressed by policy makers at the World Economic Forum meetings, which ended in Davos yesterday, to strike a credible agreement with its creditors.
Policy makers from Hong Kong to Canada also used the annual event to push euro-zone counterparts to boost bail-out cash to protect Italy and Spain.
EU leaders will meet in Brussels today to draw up a fiscal compact to strengthen governance of the euro zone.
Failure to deliver homegrown solutions would cost Europe any chance of further outside support, and undermine the IMF’s push for more crisis-fighting resources of its own, officials said.
The concern tempered earlier optimism when delegates expressed hope Europe had succeeded in calming markets.
Delegates interviewed at the forum said the effect of the crisis would be felt beyond Europe.
"I’ve never been as scared as I am about the world," Hong Kong’ s CE Donald Tsang said yesterday. "Nobody’s immune. You need decisive action. You need to inspire confidence."
Bank of Canada governor Mark Carney estimated the European crisis would subtract one percentage point from global growth by the end of this year "and that’s in a world where this crisis is contained". Europe’s pain could be transmitted via trade or financial channels with banks already hoarding cash or investing only in domestic markets, he said.
Nouriel Roubini, co-founder of Roubini Global Economics, said Greece might be forced to quit the single currency in 12 months.
"The euro zone is a slow-motion train wreck," Prof Roubini said.
Meanwhile, the World Bank’s vice-president for Africa, Obiageli Ezekwesili, warned African countries should prepare for the effect of the euro-zone crisis that threatens to derail economic growth on the continent.
This should be done by improving trade between countries and fighting inflation, she said.
Speaking on the sidelines of an African Union summit in Addis Ababa, Ms Ezekwesili said the traditional partners of Africa in Europe were likely to be affected by the fallout of the debt crisis, which would squeeze remittances, and curb trade and tourism.
She said Africa’s economic growth forecast for this year stood at 5,3% and 5,6% for 2013, but a recession was likely to prompt a 1,7% contraction this year.
"When you talk about Greece, Portugal, Ireland and the other countries, you then look at African countries particularly linked to them. We keep our eyes on countries like Cape Verde, Guinea, Nigeria, Sierra Leone," she said.
Ms Ezekwesili forecast a downturn in trade of at least 30% for some African countries.
She said some countries in Africa sent 60% of their exports to a particular country in Europe, and these were likely to face a downturn in earnings due to the crisis.
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