Germany has 'budget control' plan
Germany has confirmed it drafted proposals to intervene directly in the Greek budget if it consistently fails to implement reforms.
European sources confirmed the plan yesterday, saying "several ideas are being discussed on how to react to a programme which is consistently off-track".
"If the Greeks aren’t able to succeed themselves with this, then there must be stronger leadership and monitoring from abroad, for example through the EU," said German economics minister Philip Rössler, the first member of chancellor Angela Merkel’s cabinet to confirm the proposal to appoint a "budget commissioner".
"We need more leadership and monitoring when it comes to implementing the reform course." Though the proposals would apply to all programme countries with a backed-up reform programme, the paper is focused on Greece as it struggles to cope with its €350 billion debt mountain.
Amid repeated failures to meet the terms of its current programme, agreed with EU partners, Athens is currently negotiating a second €130 billion package and a debt restructuring plan with its private creditors.
The German plan, leaked to the Financial Times, says that, "given the disappointing compliance so far, Greece has to accept shifting budgetary sovereignty to the European level for a certain period of time."
European officials say a central problem is Greece's decentralised budget structure, which makes it "near-impossible for Athens to exercise fiscal discipline".
"One idea to cope with this is the introduction of a legal clause into Greek law to give deficit reduction absolute priority in the system," said the European official familiar with the document.
Another idea is to have external expertise on the ground, as well as the Troika, with some decision-making power.
This "external expertise" would have the authority to make sure Greece's programme gets back on track, giving debt-repayment priority over other government spending.
The European Commission said it wants to reinforce its monitoring of Greek finances, but that Greece should retain sovereign control.
Amid this sign of resistance from the European Commission, the official said the talks were at an early stage: "It’s all about stabilising Greece and helping it."
Greek officials rejected the proposal, saying it was contrary to national sovereignty.
Meanwhile, Greece and its private investors are close to a deal which will pave the way for a second bailout.
Greece and its private creditors are "very close" to an agreement on a debt-swap, government spokesman Pantelis Kapsis said this morning.