–PDMA Chief Postpones Appearance At EU Parliament Econ Ctee>}
–Petros Christodoulou Cites Pressing Business In Greece
–EU Commissioner Rehn Says Greece On Course For 4% Deficit Cut In 2010
–Eurostat Chief Not Informed Greek Use Of Swaps To Cut Deficit

LONDON (MNI) – Greek debt agency chief Petros Christodoulou has
postponed an appearance in front of the Economic Committee of the
European Parliament, citing pressing business in his own country.

The hearing will take evidence from EU Economic and Monetary
Affairs Commissioner Olli Rehn and Goldman Sachs Bank Chairman Gerald
Corrigan on the Greek fiscal crisis and lessons from it.

EU Economic and Monetary Affairs Commissioner Olli Rehn said that
Greece had shown the need for reinforced economic policy surveillance
as well the need to establish a “permanent crisis resolution mechanism”.

Rehn told the committee, however, that the crisis resolution tool
should be seen only as a ‘last resort’ and the terms of its aid would
therefore have to be made unattractive.

Rehn said that the Commission and the European Central Bank and the
International Monetary Fund were working ‘excellently’ on resolving the
Greek situation. Greece remains on course to achieve the 4% of GDP
reduction in its budget deficit which it has targeted for this year.

Greece had shown the need for the enforcement procedures of the
Stability and Growth pact to be given teeth. The pact provided a ‘solid’
set of rules, he said, on member states’ public finances but the problem
was always securing compliance.

The commissioner said that the ‘peer pressure’ approach to
implementing the stability pact had ‘lacked teeth’ and that EU member
states had overpowered the Commission in recent years and diluted the
terms of the pact.

The commissioner said that the Commission had already had a ‘good
exchange of views’ today on the need for reinforced surveillance of
economic policies and said that it is recognised that surveillance
should extend to macroeconomic imbalances within the euro zone and go
beyond budgetary imbalances.

Rehn said that he now had a mandate to make proposals on reinforced
economic surveillance withing the euro zone and that this would include
an EMU facility which would provide aid – although on terms of strict
conditionality.

There had been ‘broad support’ within the Commission for the
proposal, Rehn said. He said that he would now put the proposal to EU
finance ministers. The ministers are due to meet in Madrid this weekend.

Director General of Eurostat Walter Radermacher told the committee
that the EU stats agency had already undertaken visits to Greece during
2010. Its work with the statistical authorities in Greece to improve the
quality of public finance reporting in the country.

Radermacher said that Greece had failed to report the use of
derivative instruments and said that these had been used to
‘artificially’ reduce the value of the Greek budget deficit. Goldman
chief Corrigan is likely to shed more light on the Greek use of
derivatives when he speaks to the committee later this afternoon.

Rehn said that Belgium, Italy and Poland had all used derivatives
to flatter their public finances but – in line with new rules on the use
of swaps introduced by the EU in 2008 – had revised their historic
deficit numbers. Greece was the only country which had not done so, Rehn
said.

Rehn said that he had ordered Eurostat to undertake a “profound and
thorough investigation” into the issue of the use of derivatives by
member states. Eurostat would also be given ‘serious auditing powers’,
Rehn said, so that they would in future be able to adopt a more
‘intrusive’ role in examining member states’ budgets.

Radermacher suggested that this would allow Eurostat to look into
the financing details of state hospitals and other areas of public
sector financing.

Commissioner Rehn said that the EU is now getting the Greek
situation ‘under control’ – both in terms of now securing the ‘right
tool box’ to resolve the situation and in terms of Greece itself
doing the fiscal work needed to bring its deficit down.

Rehn also touched on Portugal, describing their stability plan as
‘ambitious’ but also warning that the planned Portuguese consolidation
effort would be subject to risks – both macroeconomic and fiscal. If the
latter materialised, the Portuguese government would have to be ready to
implement further fiscal measures.

Goldman Sachs’ Managing Director and former New York Fed President
E. Gerald Corrigan told the committee that there was a need for
‘absolute transparency’ on the rules governing sovereigns’ financial
reporting.

Corrigan told the committee that he thought there was a ‘compelling
case’ for cross-border rules on financial reporting for sovereigns. His
comments followed revelations earlier this year that Goldmans
had advised Greece on the use of derivatives in its financial
accounting.

The Greek episode had shown the need for a proper audit processes
for national public finances and for Eurostat to be as politically
independent as the European Central Bank.

–London newsroom: 00 44 20 7862 7494; email: dthomas@marketnews.com

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