Euro zone pushing for tougher policing of Greece

Reuters

By John O'Donnell

BRUSSELS (Reuters) - Some euro zone countries want a European Commission task force to be given extra powers to oversee the sale of Greek state assets and the country's civil service under a far-reaching plan to tighten supervision of Athens, EU sources have told Reuters.

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The radical proposal, dismissed by some officials as a form of colonialism and which may be shot down in the face of strong opposition, underscores mounting pressure for stricter policing of Athens, with some ready to see its sovereignty clipped.

Euro zone leaders meet on Sunday to discuss further aid for Greece and tighter controls are high on the agenda. One official said there was wide support for closer supervision of Athens, which has made scant progress on privatization and other reforms.

"It's that or not getting the money," said one euro zone source, who supports the idea of letting the Commission's Greece task force "take over some of the sovereign functions of the state" to "get the machine running."

"It is assistance imposed from outside. It's where outsiders take over some elements of the operation," he said of the proposal, which would involve deploying several hundred technical experts on the ground to administer Greece.

"The idea is living in some capitals. There is no alternative."

The Commission has already dispatched a small number of officials to Greece as part of the EU/IMF 'troika' that is responsible for assessing how well Athens is doing with meeting economic targets. In addition, the Commission's task force helps Athens on tax reform and tapping EU structural funds.

"The scale of the intervention is unparalleled," said the source. "If there was a track record of responsible management, such as in Ireland, things would be different. But that track record is lacking in Greece."

Greece is set to receive another 8 billion euros ($11 billion) of EU/IMF aid in November -- the latest payment from a 110 billion euro bailout agreed last year -- and is expected to get another multi-billion-euro package of support soon.

With the economy stagnating, lenders are banking on Athens' selling assets such as ports and power companies to raise funds. It has said it will generate 50 billion euros by 2015, but has so far raised roughly 1.3 billion euros via privatizations.

Other officials, while declining to comment on the specific tighter-oversight proposal, said there was widespread political support to impose stronger policing on Athens.

"Support for stronger supervision is certainly there," said one.

"You need someone who can speak Greek but who is not on the side of the Greeks," said the source. "Their powers would be tied to the conditionality of the loan. It has to be presented carefully -- call it technical assistance or something. You can't trample all over them."

Such a blatant move to impinge on sovereignty would put the European Commission in an uncomfortable position. It wants a bigger role in setting national budgets, but draws the line at implementing them.

"The task force is administrative," said a spokesman for the EU's executive arm. "Its role is to support Greece and we don't intend to change this mandate."

AUTHORITY

Under the proposal, which chimes with a Dutch initiative for countries asking for financial aid to be placed under "guardianship," the Commission's Greek task force could be bolstered to hundreds of staff.

It echoes a suggestion made earlier this year by Germany's top official in Brussels, energy Commissioner Guenther Oettinger, that EU officials should take a leading role in Greek tax collection and privatizations.

"It is a matter of authority," said the first source. "There will be a lot of resistance. The formal authority is not in their hands -- Greeks must accept that."

However, one EU official cautioned that the idea would encounter fierce resistance in Athens, Dublin and other capitals, making it all but unworkable as such a program would require their support.

"Giving the task force executive powers is an idea which has been in the air," he said. "But the Greeks would never accept that and neither should they."

While such a move may reassure lenders such as Germany that further loans to Greece are safe, it would likely antagonize Ireland, which would fear receiving the same treatment, despite having made rapid progress on spending cuts.

(Additional reporting by Ingrid Melander in Athens; Reporting By John O'Donnell; editing by Luke Baker)