EU Could Make an Example of Greece
While just 3 percent of the euro zone's gross domestic product (GDP), Greece will be front and center at this week's EcoFin meeting in Brussels.
The European Union finance ministers will try to pin down Greece on its strategy for reducing its huge deficit and plans to reform its statistics office amid fears it has been cooking the books for years.
The European Commission's statistics office, the Eurostat, questioned the Greek figures at least five times between 2005 and 2009. The Eurostat said there are problems with the methodology Greece uses to calculate its budget deficit and also that there is political interference.
And the Eurostat's report on the Greek statistics even puts the current numbers in question, saying "unless the institutional weaknesses uncovered during the investigation of the irregularities underlying the 2009 notifications of data are corrected and proper checks and balances introduced, the reliability of Greek deficit and debt data will remain in question."
The EU approach with Greece, so far, has been disjointed. While countries like Luxembourg and France say they won't allow Greece to receive IMF help, others, like Germany and The Netherlands say Greece will have to solve its problems alone and there won't be a bailout.
The discussions in the EcoFin could lead to a future excessive deficit procedure being open against Greece. This has happened in the past with almost all EU countries, but no country ever received a fine before. But this is about to change, according to some analysts.
"It' a matter of when, not a matter of if this is going to happen", said Hans Martens, chief executive of the European Policy Centre, a Brussels think-tank.
France and Germany were very close to receiving a fine five years ago for not respecting the Stability Pact, which sets the budget deficit limit as under 3 percent of a country's GDP.
At the time, those countries used all their political influence, leaving the impression the Commission would never be strong enough to impose fines on EU countries.
"This could prove different in the Greek case", Martens said. "It could be easier to fine Greece than the largest EU economies, especially when we see there was statistics problems for so long."
The fact Greece has respected the 3-percent limit only once since it joined the Eurozone in 2001 doesn't help either.
"The problem is that if the EU doesn't do anything this time, there will be a chain problem: who's next? So they have to act," Martens said.