Cause and Effect in European Politics and Law

A Crisis of Vision: Greece and the Fiscal Pact

Adelina Marini, February 7, 2012

There is a crisis of vision at the moment in terms of the eurozone crisis and specifically in terms of Greece. This is what Mr Dimitar Ashikov, a macroeconomist and owner of the Domani Coffee Roasting Boutique in Sofia, said, who is also a host of euoutside. On February 4th he, together with euinside's Ralitsa Kovacheva and Vihar Georgiev, doctor in European Studies discussed the already complete fiscal compact, the growth measures, which were also a leading topic at the first for this year European Council on January 30 and the again unleashed situation in Greece and the negotiations for a haircut of its debt.

According to Mr Georgiev the fiscal compact is a very unambitious document because of the impossibility for it to be part of EU's legislation because of Britain's refusal to support it. This is a problem, he explained, because at the moment the EU has quite broad powers and it is hard to do something in the EU without the EU. He expressed bewilderment from the debates that took place in Bulgaria on the issue, as a result of which the Bulgarian government supported the compact but not all of its provisions. Vihar Georgiev specified that at that stage there were no reasons for concern and Dimitar Ashikov added that he was a bit surprised that the problems reflected in the pact were discussed in Europe for months, especially in the second semester of 2011, while the Bulgarian parliament managed to view all its pros and cons in just a day.

Regarding the measures for growth and jobs, approved by the leaders of the 27 member states on January 30, Dimitar Ashikov underlined that there could not be single measures for the entire EU, neither in terms of the labour market nor in terms of economic growth, because every country has its own specifics. Some countries are export oriented, others focus on services and agriculture. According to him, every country has to develop a national programme of its own.

The topic "Greece" is again in the headlines because of the lack of convergence of the positions in the negotiations between the broad coalition government of the national unity, led by Lucas Papademos, a technocrat, and the country's creditors with an approaching deadline - Greece needs a new loan, for now estimated to be 130bn euros by the end of March. In order to receive that loan however Greece has to implement difficult conditions for spending cuts and structural reforms, accompanied by a deal with the private lenders to write part of the Greek debt off so that it can reach "sustainable" levels of 120% of GDP by 2020.

Mr Ashikov thinks though that the number 120 is unbearable even for a country like the US, where it is supposed that 100% of GDP is the maximum level of debt that can be managed. And for Greece, he says, this level of debt is as killing and will only lead to piling of more debt because the economy has been shrinking for another year in a row. Precisely regarding Greece he formulated the expression "a crisis of vision" because, he said, all focus is now on spending cuts and not on economic growth, stabilisation of the economy and the social system.

During the conversation the three interlocutors discussed the leaked unofficial proposal of Germany for appointment of a budget commissioner for Greece, who will have the power to impose veto on the Greek budget. A proposal that never saw daylight but caused furious reactions in Greece and in other countries. Vihar Georgiev called it outrageous because it was destroying the entire logic of the European integrational process, as well as the principle of equality in the EU. He warned that he was considering seriously this proposal no matter that it had not been realised because it was a very bad signal for the common European future.

According to Dimitar Ashikov however, this proposal was just an exchange coin, aimed at brining more power to the negotiations. Probably it was traded for withdrawal of the request the ECB to take part in the deal for a debt write off.

euoutside is a regular conversation with prominent Bulgarian experts that is being video recoded and webcast for the Bulgarian audience. It is being realised in cooperation with Domani Coffee Roasting Boutique in Sofia, Bulgaria, 4 Dimitar Hadzhikotsev str. The aim is to bring more analysis into the complex and dynamically developing events in the EU.