[MGSA-L] Calls grow for Greek Marshall Plan
june.samaras at gmail.com
Tue Jun 21 14:38:14 PDT 2011
Calls grow for Greek Marshall Plan
By GABRIELE STEINHAUSER, Associated Press – 4 hours ago
BRUSSELS (AP) — As budget cuts and tax increases push Greece deeper
into recession, politicians, economists and business leaders are
calling for a new approach — a Marshall Plan that would jolt its
economy back to life and give its citizens new hope.
Debt-ridden Greece is currently negotiating a second rescue package,
on top of the €110 billion ($158 billion) it was granted a year ago.
However, those loans depend on harsh austerity measures and an
overhaul of Greece's economy, which are designed to make the country
fit in the long-term, but will likely worsen citizens' financial pain
in the short-term.
At the same time, billions of euros foreseen for Greece are
languishing in EU coffers, as the country struggles to come up with
its part of the funding.
"You can't tighten the thumb screws indefinitely," warned Andreas
Rees, an UniCredit economist based in Munich. Yet more austerity might
drown the economy, lead to lower tax intakes and ultimately backfire
and drive the debt burden yet higher.
Already, the Greek economy is expected to shrink 3.7 percent this
year, following a decline of 4.5 percent in 2010 and 2 percent in
2009, while unemployment has shot above 16 percent. Citizens who have
held on to their jobs have lost much of their pension, had their
salaries slashed and face more job cuts in the years to come as Greece
slims down its public sector.
As angry demonstrations and defecting lawmakers endanger the passage
of the vital new reforms in parliament, politicians are increasingly
realizing that Greece's people will need some prospect of a better
future to make the belt-tightening more bearable.
Lawmakers in the European Parliament, economists and business leaders
— including the heads of German heavyweights Deutsche Bank and Allianz
— have increased their calls recently for a stimulus package for
Greece, similar to the U.S.-funded Marshall Plan that helped create
Germany's "Wirtschaftswunder" — or "economic miracle" — after the
Second World War.
"It is very important to supplement our macroeconomic efforts with
something credible," European Commission President Jose Manuel Barroso
said Tuesday, referring to the eurozone's rescue loans. "If we are
going to get benefits in the long-term we have to already start
mobilizing our resources for more practical purposes so that Greek
people become aware that there is hope and that we are not just asking
them to make sacrifices."
Just days before a summit of European Union leaders, at which Greece's
imploding financing will be top of the agenda, Barroso urged the
bloc's members to help the country get access to billions of euros in
Of the €20.2 billion in development funds budgeted to help Greece
catch up with the richer regions in the 27-country EU between 2007 and
2013, only €4.9 billion have actually been paid out. The rest is still
sitting unused in EU coffers as Greece struggles to show it can put
them to work efficiently and come up with its 50 percent of the
funding for any proposed project.
Barroso said the European Commission, which manages the funds, could
accelerate payments and frontload projects to give Greece quick access
to about €1 billion — a small fraction of what is available — to boost
job creation and help make Greek businesses more competitive.
That money would come with "tight supervision" and increased technical
assistance for Greek authorities from the Commission and other EU
states, Barroso stressed.
However, even international help to set up projects that qualify for
EU support would not get rid of the problem Greece is facing in
co-financing them at a time when government spending is being slashed.
Jean-Claude Juncker, the prime minister of Luxembourg who also chairs
the meetings of the 17 eurozone finance ministers, has called for the
co-financing requirement to be waved for Greece, and the idea appears
to be gaining momentum.
"I don't exclude that this is something that could be discussed" at
the EU summit this week, said an official at the European Commission.
The official declined to be named because Barroso's push for easier
access to EU funds for Greece is still in its early stages.
Some alterntive plans already exist. Jorgo Chazimarkakis, a member of
the European Parliament for the German Free Democrats, has proposed a
€30 billion stimulus package for Greece, dubbed the "Hercules Plan."
The package would combine the EU regional funds for the coming years
with one fourth of the proceeds of Greece's highly unpopular €50
billion privatization program.
"That would also set an even higher incentive for the Greeks to go
ahead with the privatization," said Chazimarkakis, who is half Greek,
adding that any stimulus plan has to come with EU officials overseeing
how the funds are spent locally.
To get around the co-financing problem, Chazimarkakis proposed
low-interest loans from the European Investment Bank that could be
repaid once Greece is back in shape.
However, the plan faces some significant obstacles. While the EIB
regularly provides loans for specific projects, sharing half the
burden of Chazimarkakis's Herkules plan could well put too much strain
on the bank, which last year only had €72 billion to finance projects
in all 27 member states.
More importantly, the EU's poorer states, which struggle as much as
Greece with the co-financing requirement, would likely balk at any
attempts to soften it for one country only. Greece's per capita income
may only be 89 percent of EU average, but states like Bugaria and
Estonia, which have managed their budgets much more tightly, have
per-head incomes that lie 57 percent and 35 percent below average
What no one denies is that Greece is in deep trouble, as it now has to
convince not only the markets that it has the wherewithal to get its
finances back under control, but also its own citizens that the
efforts are worth it.
"Foremost you need a strategy for the time after the imminent debt
crisis," said Ulrich Kater, chief economist of Germany's DekaBank.
"And that has to be a growth strategy."
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