Greeks Reject German Plan for EU Budget Commissioner; On the Verge of a Deal, Yet Again; Political Reality

Europe has been on the "verge" of a deal for two weeks. However, a deal is meaningless if Germany insists on budget controls. Actually a deal now is meaningless even if Germany does back down because at some point Greek politicians will have had enough. Here are the latest stories.

Yahoo! Finance reports Greece, creditors on verge of clinching debt deal

Greece and its private creditors said on Saturday they were piecing together the final elements of a debt swap and expected to have a deal ready next week, essential for sealing a new bailout and avoiding an uncontrolled default.

After muddling through round after round of inconclusive talks, the negotiations are in their final phase - though it appeared unlikely that a preliminary deal would be secured in time for a European Union summit on Monday.

Greek bondholders said the two sides were finalising a deal along the lines of a proposal made by Jean-Claude Juncker, the chairman of euro zone finance ministers.

The bondholders' comments suggested creditors had accepted Juncker's demand for a coupon, or interest rate, of below 4 percent on new, longer-dated bonds that Athens will swap for existing debt.

Greeks Reject German Plan for EU Budget Commissioner

It would be foolish to throw another 130 billion euros down the Greek rathole, but if Germany backs down it could happen.

The BBC reports Greeks reject German plan for EU budget commissioner

Greek officials have reacted angrily to a leaked German proposal for an EU budget commissioner with veto powers over Greek taxes and spending.

The Greek government said it must remain in control of its own budget.

The European Commission says it wants to reinforce its monitoring of Greek finances, but Greece should retain sovereign control.

Under the German proposal, a budget commissioner would have veto powers over Greek budgetary measures if they were not in line with targets set by international lenders.

Greece would also legally commit itself to servicing its debt, before spending any money in any other way.

"Given the disappointing compliance so far, Greece has to accept shifting budgetary sovereignty to the European level for a certain period of time," the Financial Times quotes the German plan as saying.

Under the proposals, European institutions already operating in Greece should be given "certain decision-making powers" over fiscal policy, a German official told the Reuters news agency. He was speaking on condition of anonymity.

The austerity measures have angered many Greeks. In Athens on Friday, protesters tried to blockade inspectors from the "troika" of institutional lenders - the EU, the International Monetary Fund (IMF) and the European Central Bank (ECB) - into their hotel.

Elections in Greece are due to take place in April.

Political Reality

Mark Lowen BBC News, Athens provides additional color commentary.

In reality, Greece's finances are already to a large extent controlled by foreign forces. The debt-stricken country has received enormous bailouts from the EU and IMF conditional on deep cuts and fiscal reforms drawn up largely by officials in Brussels.

This new German proposal is clearly prompted by the widespread concerns that Greece is not succeeding in bringing its budget into order. Reforms have been slow and the budget deficit remains above target.

But ceding more control to Brussels would be deeply unpopular here. Most Greeks are against the austerity programme demanded by the EU and IMF.

And much popular anger is directed at Germany as Europe's paymaster general. The fact that Berlin has raised this latest plan won't soften sentiments here.

The popularity of technocrat, temporary prime minister Lucas Papademos has plunged from 75% to 8%. Greek citizens are clearly fed up. Anger is going to erupt big time soon.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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