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| Time to show them |
| Pierre Briancon / Mar 05, 2010, 00:36 IST |
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Germany/Greece: George Papandreou gets it. The Greek prime minister is not taking his country's problems lightly as he asks fellow euro zone members to make good on their commitment to stand by Greece. His calls should be heeded.
Papandreou's first plan was substantial, but failed to convince investors and his European allies. But this week's supplementary deficit-cutting measures show he's ready to do what it takes to reverse years of fiscal neglect. They include additional tax increases, wage cuts for civil servants and pension cuts for all. Without waiting for European help, Greece on Thursday showed it was ready to face markets judgment and launched a 10-year, 5 billion euro ($6.8 billion) note.
Papandreou must now convince Germany that he deserves EU help while he steers his country to sustainable finances. Angela Merkel so far has been following her country's traditional fiscal hard line, but the German chancellor now seems inclined to make some sacrifice for the sake of the euro. Her coalition partners, the liberals of the FDP, remain hostile to any sort of bailout.
Greece's latest effort should help Merkel press her allies into agreeing to the support plan, already discussed with France, which would give Greece financial guarantees to help it keep borrowing from the market.
Papandreou’s new measures will make it easier for him to reach his target of cutting the budget deficit from 12.7 percent of GDP in 2009 to 8.7 percent this year, and 2.8 percent in 2012. That is a faster decline than others are promising. France, for example, says 2014 is the earliest that a deficit currently running at 8.5 percent of GDP will fall below the euro zone’s supposed limit of 3 percent.
Merkel would be right to insist that Greece provide not only clear targets and credible measures but impeccable execution. In the meantime, Germany and France should provide financial guarantees to help lower the interest rate on Greek debt - still about 3 percentage points higher than Germany. A little help from friends would allow better terms in the future.
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