Last week the European Union economy and finance ministers (Ecofin) council approved the Greek stability plan which entails a 4 percent cut in the budget deficit this year, to bring it to 8.7 percent. But the mood in Brussels is still in favour of further cuts, Greek newspapers report.

Ta Nea suggests that Greece is under pressure to save three billion euros above current projections this year, through measures that may include mass layoffs of public servants servants and the elimination of the Christmas, Easter and summer bonuses (known as the 13th and 14th wage) paid to public servants.

The latest Ecofin council, in combination with last week’s EU emergency summit, has seen Greek-EU relations turn a corner.

Whereas Prime Minister George Papandreou, Finance Minister George Papaconstantinou and the eurogroup until now reinforced each other in pushing for austerity measures, a difference in emphasis now seems to be emerging, with Athens fearing that further cuts in salaries and benefits, and mass layoffs in the public sector, could flatten the already fragile Greek economy.

The Stability Plan is up for review on March 16, only a month from now. The government now seems to be weighing the option of an appeal to the International Monetary Fund against carrying out further EU commandments come spring, newspapers report.

Kathimerini reports that the European Central Bank is pressing for a 5.25 percent deficit reduction this year, which represents a major revision of the 2010 budget approved by Brussels.

Some observers of the Greek economy fear that it will shrink by more than the projected 0.3 percent, making it necessary to adjust the deficit reduction proportionally to GDP.
The finance ministry recently reported a good budget performance for January (it has promised a monthly performance review) thanks to an extraordinary tax on companies making more than five million euros in profits in their last tax return.

It also reports a 10.6 percent reduction in expenditure, overshooting the monthly target.

Nonetheless, the harshest measures so far, officially announced on February 9, to reduce public sector above-salary benefits by 10 percent, which is effectively a 4-6 percent public wage bill reduction, seems to be inadequate to satisfy Brussels.

This and a new tax bill, which includes a higher fuel tax, are included in the Stability Plan.

Another qualitative difference this week comes on the domestic political scene.

Thus far, the New Democracy leader Antonis Samaras, who leads the main conservative Opposition party, has sounded concessionary on the economy, not wishing to replicate Papandreou’s record of undermining consensus, while pitching battles on more ideological issues such as the immigration bill and public order.

That may be about to change. Last week the Papandreou Government announced that it would seek a parliamentary committee of inquiry into the figures sent by the National Statistical Service to the European Commission in the years of conservative rule, 2004-2009.

The conservative opposition now wants to extend that committee’s scope of inquiry backwards to 1981, when the socialists first came to power and began running up high deficits and debt.

It is a stock-in-trade argument in Greek politics to fiddle with the temporal scope of an inquiry. New governments typically want to chastise predecessors, who in turn argue for a massively expanded scope in order to dilute their liabilities.

But in the highly inflammable situation the government now faces, this perfunctory argument is no longer perfunctory.

It could become the excuse for a parting of the ways and make Prime Minister George Papandreou’s job a great deal harder than it already is.

John Psaropoulos is the former editor of Athen News and a political commentator and analyst. www.thenewathenian.com