19th March 2010
Countries all over the world are still struggling to emerge from the worst global recession since the 1930s, yet this crisis should be seen as an "opportunity for deep changes to make the economy we both, Greeks as well as Europeans, can be proud of," Greek prime minister George Papandreou told the European Parliament’s special committee on the economic, financial and social crisis (CRIS).
Addressing a public hearing on March 18 2010 on European economic governance and EU tools for economic and social recovery, Papandreou said that Greece, in the throes of an "acute crisis", was introducing the "most difficult measures since World War 2 to put our house in order".
Despite this, Greece was not asking the EU for help, according to CRIS chairperson, German liberal MEP Wolf Klinz, who referred to the EU finance ministers' decision on March 16 to back the "very challenging austerity measures" put forward by Athens.
"We are not looking for a scapegoat nor asking for help to live from the wealth of others but what we do need is strong political support to make all these reforms and to make sure we will not have to pay more than is necessary," Papandreou said.
He said that Greece needed "to be able to borrow at rates which are normal". Calling for an end to "opportunistic speculation", Papandreou said that if the Greek government kept borrowing at such high interest rates, it would not be able to sustain the deficit reduction.
"We are really shocked that those who had to be bailed out with taxpayers' money used the first opportunity to speculate against the euro to make a profit," Klinz said. Papandreou: "We need more Europe rather than less Europe".
The time had come "to put the loaded gun on the table", to make sure the markets would respond positively, he said. In this context, Greece could provide an opportunity to deal with the issue of speculation in the EU and also at global level. Agreeing with a reported statement by International Monetary Fund managing director Dominique Strauss-Kahn during his visit to the European Parliament the previous day, Papandreou said "we must not lose the opportunity to fix the global financial system".
All of the measures Greece had taken reflected its commitment to protect the stability of the common European currency, Papandreou said. But Europe needed to recognise that the measures put in place, and those still to come, would need a certain time to take effect. "Change cannot be executed as swiftly as credit default swops," he said.
Theodoros Skylakakis (EPP, EL) and Pascal Canfin (Greens/EFA, FR) asked about reforms to the Stability and Growth Pact and whether it should be made stricter or more flexible. Papandreou said that the EU should look at the "institutions which are missing in this project".
He urged "more co-ordination and supervision" to ensure that countries with problems also received support, not just punishment. Otherwise there would be a failure not only of the country concerned but of the system as a whole.
"We all say that there are plenty of instruments but nobody respects them because there is nobody at the helm" of the EU, said CRIS rapporteur Pervenche Berès (S&D, FR), who believed the measures put forward by Greece "merit admiration".
Nikolaos Chountis asked Papandreou whether there was a specific support plan being prepared by the EU to assist Greece and whether such a plan would also help the EU pull out of recession. "I would prefer a European solution to be able to show to the world that Europe can act together," Papandreou said, "rather than turning us to International Monetary Fund".
According to Mario Borghezio (EFD, IT), the "excessively draconian measures contribute to agony" of Greece. He asked if the Greek government had considered the option of devaluation. Papandreou rejected this idea as it would in his view send the wrong signals.
Several academics also took part in the discussions.
According to Loukas Tsoukalis, Jean Monnet Professor of Integration at the University of Athens, and President of Eliamep (Hellenic Foundation for European and Foreign Policy), the Stability and Growth Pact "has become more and more flexible, to put it diplomatically".
He called for the European dimension of European Monetary Union to be strengthened, partly by "closer and increasingly binding coordination of national economic policies with incentives and sanctions".
Jean Pisani-Ferry, Professor of Economics at the University of Paris-Dauphine and fellow of the Bruegel institute, pointed to the lack of a crisis management regime in the euro zone.
" Greece is doing the IMF programme without IMF money," he said, adding that due to the "principle of no co-responsibility for public debt" and "no assistance principle", the EU could not provide help within the eurozone. But as there is room for assistance, the EU should put in place a "system of conditional assistance," he said.
On March 17, European Commission President Jose Manuel Barroso praised what he called the "remarkable" efforts of the Greek government. But there are divisions among European Union members about how to deal with the Greek debt crisis, the Voice of America said.
German chancellor Angela Merkel, speaking on March 17, warned other EU countries against giving Greece what she called "rash" financial support. She said the EU monetary union should be able to expel members who violate the rules repeatedly.
Other European officials have said that a failure to help Greece would show that Europe is not capable of handling its own problems, VOA reported.
Meanwhile, on March 18, the European Commission said that it had decided to bring Greece before the European Court of Justice (ECJ) for incomplete implementation of three ECJ judgements against Greece with regard to the refund of unduly paid taxes, including VAT.
Under EU law, taxpayers have the right to be repaid taxes which were levied by member states in violation of EU law. Greece did not make this repayment possible.
Where a member state is found to have imposed a tax which is in violation of EU law, individuals have the right to obtain a refund of the amount of tax paid, not due, under EU law.
On three occasions, Greece was condemned by the ECJ for the wrong application of the VAT directive, in a way that should have entitled taxpayers to a refund of the unduly paid VAT or to a deduction. In practice Greece did not make these refunds or deductions possible.
The Commission sent a reasoned opinion to Greece in February 2008 and October 2009, respectively. "However, since Greece did not take appropriate action, the Commission has now decided to refer the cases to the Court of Justice," the European Commission said.