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Greece pledges cuts in bureaucracy By Tony Barber in Brussels Published: December 11 2009 10:31 | Last updated: December 11 2009 10:31

Greece has acknowledged to its European Union partners that its public sector is riddled with corruption and must be reformed to rescue the nation from its fiscal crisis, José Manuel Barroso, European Commission president, said on Friday. On the second day of an EU summit in Brussels, Mr Barroso told reporters that George Papandreou, Greece’s prime minister, had promised deep cuts in the state bureaucracy in a presentation to fellow EU leaders on Thursday night. Greece is in the throes of the most serious fiscal emergency to strike the 16-nation eurozone since European monetary union was launched in 1999. Its soaring budget deficit and public debt are exacerbated by a lack of business competitiveness and a crisis of international confidence in the credibility of government economic policies. “Prime minister Papandreou recognised that there was a huge problem of corruption throughout the administration, including in public procurement,” said Mr Barroso. “He spoke of a reduction in the levels of administration. Whereas there are four or five now, from regional to local level, he promised to suppress two of them, because they are expensive.” Mr Barroso said he had the impression that the EU’s other 26 national leaders had greeted Mr Papandreou’s remarks as “a clear and unequivocal statement” of a commitment to introduce swift, cost-cutting reforms. “I really trust his determination to address the structural problems of the Greek economy,” said Mr Barroso. But other participants at the summit said there had been little discussion of the Greek premier’s presentation, and other leaders – especially those of the 15 countries that share the euro with Greece – wanted to see more action and fewer words from Athens. Mr Barroso declined to comment on whether Greece might turn to the International Monetary Fund for assistance if its problems expanded beyond control. “The EU and the euro area have the means to act. I don’t comment on hypothetical negative scenarios,” he said. EU officials said eurozone governments and the European Central Bank did not favour IMF intervention for Greece and wanted to show they could manage the crisis on their own. If necessary, a co-ordinated response would come from the ECB and the Commission, with support from Germany and France, the two biggest eurozone states. Greece is expected to record a budget deficit of more than 12 per cent of gross domestic product this year, and its public debt is projected to be 113 per cent of GDP. Mr Papandreou is expected on Monday to outline how he intends to slash the deficit to 3 per cent – which, under EU rules, is the upper limit in normal economic times. In a sign of doubt in financial markets about the likely effectiveness of Greek economic policies, yield spreads on Greek government 10-year bonds have risen this week to their highest levels above German bonds for seven months. The underlying problem is, however, one of credibility. Other eurozone countries were incensed in October when Greece’s newly elected socialist government announced that the nation’s public finances were far worse than previously claimed. The socialists blamed the misreporting on faulty statistics and the errors of the previous conservative government. Mr Barroso said the Greek crisis had focused the attention of EU leaders on the need to find new ways to measure the quality rather than the amount of government expenditure. “When we talk of spending, it matters if it’s to reinforce the bureaucracy or to invest in new sources of growth,” Mr Barroso said. “Finance ministers look at the figures from the budget, but we don’t have enough sophistication in our measurement of spending.” Copyright The Financial Times Limited 2009. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.

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