Commission gets tough with Greece over deficit

The European Commission will next week present recommendations to Greece on how it should reduce its budget deficit. The country will also receive a formal Commission warning that its economic policies are not in line with its obligations as a eurozone member.

The Commission may also launch an infringement proceeding it is preparing against Greece for misleading the EU’s statistical office, Eurostat, about the state of its public finances. In addition, an action plan on improving the Greek statistics will be presented. A Commission report earlier this month identified “severe irregularities” in Greek economic data.

A spokesperson for Joaquín Almunia, the European commissioner for economic and monetary affairs, said it was “likely” that the recommendations would be presented by the Commission on 3 February. Investors, anxious to assess the scale of the Greek challenge and of the Commission’s offers of support, will be scrutinising them closely.

Deadline

One of the key elements in the Commission’s recommendations will be a deadline (probably 2012) for Greece to bring its deficit down from the estimated 2009 level of 12.7% to within the 3% of gross domestic product allowed under the EU’s stability and growth pact. Others will include reforms to bring the deficit down – notably, rigorous implementation of a package of measures announced by the Greek government earlier this month, such as local government reform, tax reform and a freeze on recruitment to the civil service. The Commission will propose regular evaluation of Greece’s compliance with the recommendations, with the first check-up after four months.

Finance ministers are expected to adopt the Commission’s recommendations at their meeting on 16 February, making them binding on Greece.