Horst Reichenbach, who heads a task force set up by the European Commission to give technical aid to Greece, said it was important to “give some hope to the Greek population which, as we all know, is at the brink of not accepting any further pain.”
Mr. Reichenbach said that the commission, the Union’s executive branch, was examining ways of allowing E.U. funding to be used to help guarantee increased lending by the European Investment Bank in order to fill a vacuum caused by the inability of Greek banks to lend to businesses. Around €15 billion, or $20 billion, in E.U. structural funds have been allocated to Greece through 2013.
His comments come amid increasing concern that, in addition to pressing for essential changes to the Greek economy, international lenders need to step up their efforts at reversing economic stagnation.
As if to underline the point, Greek transport workers staged a 24-hour strike Thursday, bringing the transit system to a standstill to protest the austerity drive deemed essential by Greece’s creditors. General strikes have been called for Oct. 5 and 19.
Speaking in Parliament on Thursday, the Greek finance minister, Evangelos Venizelos, said that Greece’s situation was “critical” and that the government’s priority was to keep its commitments to foreign creditors so as to avoid what happened to Argentina, which defaulted on its debt in 2001-02.
“The crisis is not what we are living today, namely cuts to wages, pensions and income,” Mr. Venizelos said. “That is our effort to avert against the crisis. The real crisis will be like that of Argentina’s in 2000 — a total collapse of the economy, of institutions, of the social fabric and productive forces of the country.”
He added that a new property tax, part of the additional austerity measures, would apply beyond 2012 and not just for the next two years as stated when the levy was announced this month. But the long-term unemployed would be exempt from the tax as long as their gross annual income was less than €12,000, with that threshold increasing by €4,000 for each child.
Mr. Venizelos appealed for greater honesty in the debate over the economy, saying that the country’s political class must be clearer about the situation and what is required.
“The lies to the Greek people must stop,” he said, adding that now it was time for “work, work and more work” to meet fiscal targets and revive the economy.
The European commissioner for economic and monetary affairs, Olli Rehn, said Thursday that Greece would remain within the euro zone but did not explicitly rule out the possibility of it defaulting.
“An uncontrolled default or exit of Greece from the euro zone would cause enormous economic and social damage, not only to Greece but to the European Union as a whole, and have serious spillovers to the world economy,” Mr. Rehn said during a speech to the Peterson Institute for International Economics in Washington. “We will not let this happen.”
International lenders have to decide shortly whether to release the next installment of aid, worth around €8 billion, without which Greece probably would default in October. Experts from the three international institutions known as the troika — the European Commission, the European Central Bank and the International Monetary Fund — are likely to return to Athens early next week to pave the way for a decision on the next loan.
In the meantime, longer-term work is going on to try to help the Greek government undertake crucial changes, including an overhaul of a tax collection system widely seen as ineffectual. European experts believe that the key to changing the system is the installation of more information technology equipment and the creation of clear rules that reduce the amount of discretion tax inspectors have.
Substantial changes will probably take around a year, said an E.U. official not authorized to speak publicly on the issue, who likened the problem to an iceberg: “The tip looks O.K., but what’s below, everyone tells me, is quite different.”
Niki Kitsantonis reported from Athens.
Article source: http://www.nytimes.com/2011/09/23/business/global/europe-to-redouble-efforts-to-stimulate-growth-in-greece.html?partner=rss&emc=rss
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