New EU president Poland rings alarm bell on Greece

Jul2,2011
By Luke Baker

WARSAW (Reuters) - Poland's finance minister voiced numerous doubts on Saturday over Europe's handling of the Greek debt crisis, suggesting too much emphasis had been put on austerity and too little on growth.

The comments by Jacek Rostowski, a British-born economist and academic, have added weight after Poland took over the six-month presidency of the European Union on Friday.

Rostowski will now chair meetings of EU finance ministers and hopes to join critical talks among euro-zone finance ministers.

Speaking to foreign media in Warsaw, he suggested that not enough was being done to bolster Greek gross domestic product and that too much focus had been put on cutting spending and raising taxes.

"It's clear that everybody has made mistakes over the past year and a half," he said. "We've all been behind the curve."

"In Greece, you need consolidation and growth," he said, adding that both elements of the country's debt-to-GDP ratio needed to be addressed, not just its high debt.

Rostowski's comments reflect growing concern among EU officials that the strictures being imposed on Greece, including 28 billion euros of austerity measures between now and 2015, are too harsh for a patient already struggling to breathe.

He added that the EU could learn a lot from the IMF's experience in helping weak countries overcome their financial problems.

"The International Monetary Fund has a huge amount of experience in how to run (rescue programmes). There are lots of things still that we can learn from the way the IMF does things," he said.

"The IMF has been more proactive, has tailored programmes more, bringing in programmes that are not seen as the first step towards bankruptcy. In the case of our European programmes, that has not been fully achieved. They must change their character and by doing that, change the way they are perceived," he said.

The EU and IMF provided Greece with 110 billion euros of emergency loans in May 2010, with the next installment due in the coming weeks to stave off the imminent threat of default, but Athens now needs another package of a similar size.

Support for the Greek, Irish and Portuguese bailouts has deteriorated sharply in some euro zone states, most notably the Netherlands and Finland, creating domestic political problems and deepening a north-south divide in the single currency area.

Without naming names, Rostowski said some opposition parties had shown a "breathtaking short-sightedness" when it came to taking decisions to support Greece, a position he said had threatened the stability of the entire 17-country region.

COLLECTIVE SELF-INTEREST

Poland, with steady GDP growth of around 4.0 percent per year and a growing stock market, is expected to fulfil the fiscal criteria for joining the euro as early as next year.

But Prime Minister Donald Tusk has made it clear Warsaw won't be joining until the euro zone has restabilised and put in place new mechanisms for assuring its long-term stability.

Rostowski said that could be more than five years away.

He said that in the meantime Europe must focus on passing the stricter debt- and deficit-monitoring procedures contained in legislation now before the European Parliament, and that it had to re-examine the crisis-control measures it is adopting.

Rostowski said there could be a breakthrough in the charged political atmosphere in Europe if leaders could show more solidarity.

"What we want to do is to say: 'This is a common problem for all of us. We all benefit if we resolve it, and we're all going to lose dramatically if we don't resolve it'.
(Editing by Hugh Lawson, sourced Reuters)