Stournaras In Brussels’ Hot Seat

Greek Finance Minister Yannis Stournaras will find himself in the odd position of chairing a meeting of Eurozone finance chiefs in Brussels on Jan. 27 – but be grilled by his peers while Greece is so far behind on reforms, a snag that has delayed the return of envoys from international lenders before a next installment can be released.

Greece holds the symbolic European Union Presidency until June 30, putting Stournaras in the chair for the discussions which are expected to center around the country’s lingering economic problems and why it’s taking so long to speed privatization, fire public workers, go after tax cheats, and close a hole in the 2014 budget.

The Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) is anxious to have Greece finally do what it’s been promising to do since 2010 when the first monies that would become $325 billion in two bailouts began arriving, along with harsh austerity measures that have created record unemployment and deep poverty.

The Paris-based Organisation for Economic Cooperation and Development (OECD) has identified 555 barriers to competition in Greece, where a number of professions enjoy near-monopolies and mean to keep them so they can have guaranteed profits, although the Troika wants to see that system end.

Stournaras discussed the matter over the weekend with Prime Minister Antonis Samaras, the New Democracy Conservative leader, and Deputy Prime Minister Evangelos Venizelos, the PASOK Socialist leader, in a bid to reach an agreement that satisfies the Troika without fueling political tensions.

The newspaper Kathimerini said it was told by unnamed sources that the government is ready to accept 80 percent of the recommendations and offer alternatives to the rest.

Complicating Greece’s problems is that the country’s highest court is reportedly set to rule that military and emergency services pay cuts imposed as part of austerity are unconstitutional and must be repaid and the salary levels restored, which will cost about 500 million euros ($684.7) million.

Other public sector employees now, seeing what they believe is a precedent, are pushing for their slashed lump sum pension benefits to be restored and are expected to challenge their pay cuts, tax hikes and slashed pensions, which could undermine the country’s recovery, government officials said.

The military pay restoration order could also wipe out a primary surplus that the government was counting on to court debt relief and kick start a recovery seven years into a deep recession, and prevent Samaras from making good on a promise to restore 70 percent of it to people most hurt by the austerity measures.

“The government has very little room for manoeuvre and the verdict poses one more problem,” Paschos Mandravelis, a political commentator, told the British newspaper The Guardian. “Things are so tight, the situation is still so critical that if this now meant more measures it could easily fall.”

The high court also reportedly said it would consider  appeals from social security funds and other civil servants on similar salary regimes to the armed forces, including university professors.

“If that is the case and it is extended to other public sector employees it will be hugely significant,” Giorgos Stathakis, who is the economic adviser to the major opposition Coalition of the Radical Left (SYRIZA) party told The Guardian.

“At this point in time the funds could only come from the primary surplus but Greece is also facing a fiscal gap in 2014 and that makes things more difficult still. The 2014 budget is based on the assumption the economy will grow and so a great deal will depend on the recession,” he said.

Desperate to avoid imposing more austerity with European Parliament elections looming in May, the government has been moving ahead with plans to seize money directly from the bank accounts of officials convicted of corruption and bribery kick backs, which could bring in about 80 million euros, about $109.5 million, an insignificant amount given the country’s $430 billion debt.