German plan for Greece oversight buried at EU summit

By Alexandra Mayer-Hohdahl and Alvise Armellini Jan 30, 2012, 23:59 GMT

Brussels - A leaked German proposal to have a new eurozone commissioner oversee tax and spending decisions in Greece was swiftly annihilated Monday at a European Union summit, even as the meeting was overshadowed by the country's debt problems.

French President Nicolas Sarkozy said the idea wasn't 'reasonable, democratic or efficient,' while Italian Prime Minister Mario Monti called it 'far fetched and unpleasant.'

'My impression is that the question is off the table,' said Luxembourg Prime Minister Jean-Claude Juncker, who heads the Eurogroup panel of eurozone finance ministers.

Under the German proposal, the Eurogroup would appoint a new EU budget commissioner for Greece if Athens failed to comply with requirements dictated by its international bailouts. Greece has faced increasing pressure over its slow implementation of demanded reforms.

The leaked German document, first reported by the Financial Times, read: 'Given the disappointing compliance so far, Greece has to accept shifting budgetary sovereignty to the European level for a certain period of time.'

It proposed forcing Greece to use state revenues 'first and foremost' to pay off its debt.

Former Greek Prime Minister George Papandreou said such an unprecedented level of intrusion on national policies would be 'undermining democracy throughout Europe.'

While most EU leaders disagreed with the approach, they argued that some oversight of Greece is warranted, given the international bailout money it is receiving.

German Chancellor Angela Merkel said that there was a 'certain frustration' over developments in Greece. 'That raises the question if something can be improved,' she added.

Sarkozy said the German leader did not insist on the oversight proposal, which Berlin had circulated to euro area finance ministries on Friday, the Financial Times reported.

Over the coming weeks, eurozone countries will be asked to shell out 130 billion euros (171 billion dollars) for a second Greek bailout, on condition that private bondholders chip in with a 100-billion-euro debt writedown.

In a separate statement, euro area leaders called for negotiations on the so-called private sector involvement to be finalized 'in the coming days' so that the planned bond-swap deal could take place 'by mid-February.'

Leaders called for national unity on the fresh austerity measures that will be demanded in return for aid. 'Restoration of credibility requires that all political parties irrevocably commit to the new programme,' they said.

Greece needs to secure a deal on a fresh international bailout - due to be also financed by the International Monetary Fund - before March 20, when it will need to pay back 14.5 billion euros of maturing debt.

EU President Herman Van Rompuy was scheduled to meet with Greek Prime Minister Lucas Papademos after the summit. Juncker described it as a 'completely undramatic information exchange' and said no decisions would be taken.

Papandreou had told reporters at a pre-summit meeting of Socialist politicians that his country was 'at a turning point.'

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