A further shadow was cast over Greece’s future yesterday after a leading European policymaker warned that the debt-stricken country’s sovereignty would have to be reined in.
Jean-Claude Juncker, chairman of the Eurogroup, said that Athens’s sovereignty will be “massively limited” as part of European rescue plans and that the Government would have to model its privatisation scheme on the sell-off of East German companies in the 1990s.
“For the forthcoming wave of privatisations they will need, for example, a solution based on a model of Germany’s ‘Treuhand agency’,” he said, referring to the body that sold 14,000 East German companies between 1990 and 1994.
A reduced ability to control privatisations will be a bitter pill for the Greek Prime Minister George Papandreou to swallow as he confronts civil unrest on the streets of Athens and a slender majority in the country’s parliament.
“One cannot be allowed to insult the Greeks. But one has to help them. They have said they are ready to accept expertise from the eurozone,” Mr Juncker said.
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His warning came just after eurozone finance ministers agreed to release €12 billion (£10.8 billion) in aid to Greece but failed to come to a deal on a second bailout package.
The payment will allow Greece to avoid the immediate threat of default and is part of the €110 billion bailout package agreed last year. The Greek Parliament had to vote through a stringent set of austerity reforms including tax rises, public sector jobs cuts and asset sales in order to receive the latest tranche.
However, the country still needs a second rescue package to survive any future risk of default. Ministers had hoped that European finance ministers would come to an agreement on the second bailout package over the weekend but it now looks a like a final decision will not be made until mid-September.
In the meantime, finance ministers will work on the “precise modalities and scale” of the private sector’s involvement in the second aid package,which is said to be in the region of €120 billion.
The German Finance Minister Wolfgang Schäuble said last week that banks had agreed to roll over €3.2 billion of Greek bonds that mature by the end of 2014, but insisted that he had no further details.Despite speculation that British banks are assessing their exposure to Greece in order to follow the French and Germans, the UK Treasury said only that it was monitoring the situation.