In its report, which the European Commission will announce on Wednesday, it looks very reserved regarding the stabilization program for the 2008-2009 period because it has calculated that during 2009 the country will have 0.2% development and 3.7% deficit.
The economic and monetary affairs commissioner Joaquin Almunia is determined to follow a “straight line” not only with Greece but also with France, Spain, Ireland, Malta and Latvia, which is outside of the Euro zone.
The European Union will start penalty procedure against Greece as well as against country members of the EU, which have an “exceeded deficit.” They will be put under close supervision based on article 104 from the Maastricht Treaty.
“The insufficient control over the public expenses, the overly optimistic forecasts for profits in combination with the accounting problems in Greece, is the reason for the fiscal instability in Greece,” says the draft decision of the European Commission.
With the recommendations, which we will send to the Council of ministers of the economy with the EU (Ecofin) for Greece, the Commission will start the supervision procedure. Though, it will show tolerance for the decrease of deficit by increasing the deadline for attaining the task from two to three years, just in case Athens’ forecasts are not confirmed for the development of 1.1% for this year and 1.6% for 2010.
In the report, which will be approved on Wednesday, the Commission is offering a new reform of the insurance system, so that the public finances are not aggravated. The reform offers “a reserved policy regarding the salaries” by increasing the limits of inflation and decreasing the public expenses.
The opinion of the European Commission will be examined from Ecofin on March 10th and after that on March 24th the Commission will recommend measures, which should be taken by the Greek government and a program, which will guide the implementation.
The program is very important because if a deadline of only two years is given for the decrease of the deficit to under 3% from the GDP, then the government will have to find means of ?2.4 billion.
The recommendations to the countries, which will be under the supervision procedure, will be examined at an unofficial meeting of Ecofin in Prague on April 4-5th, where the end political decision will be made.