THE EUROPEAN authorities have raised the prospect of external involvement in the Greek tax collection system as the EU, European Central Bank and International Monetary Fund “troika” opened the door to the negotiation of a second international bailout for the country.
As the troika cleared the way last night for the release of a €12 billion loan to Greece under its existing rescue plan, EU economics commissioner Olli Rehn said the European Commission and euro zone member states stood ready to “reinforce” technical assistance to Greece.
“We remain open to explore possibilities for further and reinforced assistance should there be a need, for instance in taxation and privatisation matters,” Mr Rehn said last night.
The remarks herald the likelihood of much deeper international involvement in the internal affairs of Greece to try to prevent bankruptcy.
However, Mr Rehn’s spokesman insisted such involvement would come only at the request of Greece and would not amount to external “supervision” of a sensitive national dossier such as tax collection.
“Assistance is not supervision in our view. Assistance is giving them a hand to overcome a lack of skills or experience. It’s not to take control. It’s not to supervise as such,” he said.
The spokesman said there was a precedent for such involvement in Greece’s domestic affairs in the “technical assistance” it received from the European authorities to establish a new independent statistics office.
However, the prospect of external involvement in the country’s tax system reflects anxiety about rampant evasion, which has hampered efforts to reassert control over public finances. In addition, the suggestion of external involvement in the country’s €50 billion privatisation initiative flows from concern about Greece’s failure to advance a crucial part of its bailout programme.
The privatisation initiative was the quid pro quo last March for a reduction in the interest rate on its rescue loans, but little progress has been made. Ireland was refused a rate cut after Taoiseach Enda Kenny refused to yield to Franco-German pressure to dilute the corporate tax regime.
The delay in the privatisation plan, hugely contentious in Greek politics, cast a doubt over the €12 billion loan. The troika was also concerned at the failure to implement promised fiscal reforms. The new agreement with Athens includes “significant” cuts in public-sector employment.
Greek prime minister George Papandreou has pledged to accelerate budget reforms and the privatisation initiative, stoking opposition within his own administration.
The agreement to release the funding sets the scene for talks on a second bailout package for the country, whose finances will prevent it from returning to private debt markets next year. As much as €60 billion may be required.
Euro group president Jean-Claude Juncker said he expected euro zone countries “to agree to additional financing” but only under strict conditionality. EU authorities, unhappy with the slow progress of the Greek rescue plan, have resolved to seek tough conditions in return for aid.
