Verhofstadt unveils ‘Hercules’ plan for Greece

Verhofstadt.jpg

Two days ahead of the EU summit, the leader of the liberal ALDE group in the European Parliament, Guy Verhofstadt, unveiled yesterday (21 June) a strategy to save the Greek economy – dubbed 'the Hercules plan' – that combines fiscal consolidation measures with incentives for economic growth. 

The blueprint was presented to the press in a communications race with Commission President José Manuel Barroso.

Minutes before Verhofstadt's presentation, Barroso announced that Brussels could help to boost the Greek economy by making earlier a payment of one billion euros in EU funds earmarked for Athens under a plan to reduce economic and social differences in the 27-member bloc.

In essence, Verhofstadt considers that current plans to prevent Greece from bankruptcy neglect the fact that private investment in the country is completely hampered by economic circumstances.

Among other things, the leader of the ALDE group, who is also Europe's highest-profile federalist, suggests that part of the 50-billion euro privatisation programme which lenders are thrusting upon Greece should be attributed to a fund for investment.

IMF: More federalist than EU leaders?

Verhofstadt quoted the acting managing director of the IMF, John Lipsky, who said that it was necessary for Europeans to move forward with economic integration.

"I have to tell you, if you read what Mr. Lipsky said, I thought he was a member of the Spinelli Group," he quipped. The Spinelli Group, launched in September 2010 as a network aimed at overcoming nationalism and promoting federalism across Europe, is largely driven by the personal clout of Verhofstadt.

Verhofstadt insisted that the EU could have stopped the Greek crisis as early as December 2009, but "hesitations about the place of Greece in Europe" meant developments spun out of control. At that time, the Union was still struggling to put in place a new European Commission.

Indeed, in May 2010, Verhofstadt boldly charged German Chancellor Angela Merkel with playing the populist card and riding on anti-Greek sentiment shared by many Germans.

Dora Bakoyannis, a former minister in the previous centre-right Greek government, hailed the former Belgian prime minister's plan and commended ALDE for being "the first political group to propose a programme that gives hope for the Greek people".

Bakoyannis is now leader of the Democratic Alliance, a small party that she founded after being expelled from the New Democracy (ND) party for supporting the EU/IMF backed austerity measures.

Bakoyannis insisted that Greece was not a "failed state" and would "never be" one.

She said that the right recipe for her country was to introduce moderate taxes "that everyone pays," instead of the present system of high taxes which she said nobody was paying.

Also present to hear Verhofstadt's ideas were Theodoros Skylakakis of the Democratic Alliance, who by defecting from ND became the only Greek Liberal MEP in the European Parliament, and Jorgo Chatzimarkakis, a German liberal MEP of Greek descent.

Skylakakis said that the "half solutions" provided by the EU for Greece had created "double problems".

'A Greek-German tragedy'

For his part, Chatzimarkakis said that the Greek crisis was in fact "a Greek-German tragedy". Looking back at history, he advised his German compatriots to consider the fact that in 1953, post-war Germany had a debt agreement compared to which the present "haircut" put in place for Greece was much smaller.

Asked by EURACTIV to comment on the fact that the 'Hercules Plan' also aimed to deal with corruption and dubious political practices, Chatzimarkakis said that such a strategy had the support of Regional Policy Commissioner Johannes Hahn, who had also expressed the view that Romania and Bulgaria should also be covered by such an EU effort.

In fact, the father of the 'Hercules Plan' would appear to be Chatzimarkakis, who a year ago published with EURACTIV an op-ed titled 'Greece needs a Hercules Plan'.

Georgi Gotev

Greece, whose economy had grown strongly but suffered problems with corruption and bureaucracy, joined the euro zone a decade ago, linking its economy to other European countries.It went into recession in 2009 after 15 years of growth and its budget deficit hit 15.4 percent of GDP after a series of revisions by the government which undermined investor confidence and drove up borrowing costs.

In May 2010, it became the first euro zone member to receive a financial rescue package from the European Union and International Monetary Fund.

The 110 billion euro package was meant to see it through three years, but since then deficit and debt levels have increased and the recession has worsened. Greece's debt pile now totals around 150 percent of its annual output, and is growing.

A second package, worth an additional 120 billion euros, including 30 billion euros from privatization of Greek state assets and a similar amount from private creditors, is now being discussed.

Until future funding is agreed, at least in principle, doubt hangs over payment of the next 12 billion tranche of the first package, which is due on June 29.

The cost of insuring Greek debt has soared and it is now the highest in the world.

European governments are keen to avoid a "hard default" as that could threaten banks throughout the euro zone and further afield.

European taxpayers, particularly in Germany, have funded much of Greece's bailout, denting the popularity of German Chancellor Angela Merkel and prompting calls for private creditors to start sharing the burden. That has made a second bailout even more of a political liability for Germany's ruling coalition.

Merkel has been accused of holding up the second Greek aid package, further eroding investor confidence which could make the bailout more expensive.

  • 23-24 June: EU summit to discuss how to prevent Greek default and major eurozone crisis.
  • 29 June: Next tranche of EU-IMF package due to Greece, provided that Greek parliament backs government austerity plan.

Subscribe to our newsletters

Subscribe

Want to know what's going on in the EU Capitals daily? Subscribe now to our new 9am newsletter.