Days after promising to support debt-laden Greece if necessary, the EU will put the country under unprecedented fiscal surveillance this week, hoping to avoid the need for a bailout.
EU finance ministers, meeting today and tomorrow in Brussels, will back the exceptional measure to instill some budgetary discipline into Greece where swollen public deficits and massive debt levels threaten the 16-nation eurozone as a whole.
Market speculators are watching every move in Brussels.
On Friday EU heads of state and government promised coordinated measures and offered political support to Greece but no cold, hard cash, leaving analysts unimpressed.
The 27 European leaders also voiced opposition to the idea of euro bonds or making an embarrassing call on the IMF.
“The summit was a political bailout and lacked substance on the framework of how assistance would work in practice,” Lloyds Banking Group economist Kenneth Broux said.
He said the hope that the meeting of eurozone finance ministers today and counterparts from the whole EU tomorrow would “fill in the blanks.”
Greece has already announced tough action, including raising the pension age and forcing public sector workers to accept cuts.
Nevertheless, the cost of borrowing for Greece on bond markets has risen sharply of late in response to the country’s debt burden and fears that its proposed measures might not be enough to strengthen public finances.
The markets will be watching as EU ministers follow advice from the European Commission and take the Greek economy in hand, setting a detailed calendar for the public deficit to gradually come down.
The ambition is to help Greece reduce its public deficit to 3 percent of output in 2012.
Last year, it was estimated at a massive 12.75 percent and its overall debt levels are put at 113 percent.
It’s not just the figures that are a worry for Greece’s eurozone partners, it’s their reliability as well, as Greece has recently been criticized for being unable, or unwilling to produce sound statistics.
The EU ministers will also tell Athens that its macroeconomic policy puts the functioning of the eurozone in danger and will seek specific remedies, reform of the health and pensions systems, as well as public administration and a general reduction in government spending.
Athens will have to present its first progress report next month, another in May and on a three-monthly basis after that, an unprecedented level of micromanagement from Brussels.
“We are not going to leave them alone,” said Jean-Claude Juncker, president of the Eurogroup of eurozone finance ministers.
While Greece is being put under the financial microscope, some of its fellow eurozone nations — Spain, Portugal and Ireland in particular — know that their economies are not too far behind.
In all, 20 of the 27 EU nations are the subject of excessive deficit procedures.
All the bad news has been hurting the euro, which fell to a nine-month low of just over US$1.36 on Friday, down from around US$1.45 a month ago.
EU Energy Commissioner Guenther Oettinger said on Saturday that protecting the stability of the euro was crucial, and if member states refused to start cutting their deficits next year, European bodies should be given powers to intervene more broadly.
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