Greece scathing on German budget 'takeover' plan

(ATHENS) - A Greek government minister on Saturday poured scorn on reported calls by Germany for Athens to surrender control of its budget, as Greece said it was close to a deal with its private creditors.

Greek Education Minister and former EU commissioner Anna Diamantopoulou rejected the notion as "the product of a sick imagination".

Amid this latest controversy, senior Greek politicians and private creditors said they were close to reaching an agreement on writing down Greek debt to avert a looming default.

The idea that Greece might cede control over its budget was contained in a German submission to its eurozone partners revealed late on Friday by the Financial Times.

Under the radical German plan, a commissioner appointed by the other eurozone finance ministers would be able to veto budget decisions made by the Greek government.

The scheme emerged ahead of a meeting of EU leaders in Brussels on Monday focused on a new fiscal pact.

"Budget consolidation has to be put under a strict steering and control system," the Financial Times quoted the proposal as saying.

"Given the disappointing compliance so far, Greece has to accept shifting budgetary sovereignty to the European level for a certain period of time."

But a Greek government source told AFP that Athens had dismissed the idea out of hand.

"Greece will not discuss such a possibility," said the source.

"It is out of the question that we would accept it, these are matters of national sovereignty."

Such a move would require a "change in (EU) treaties", the source added.

The European source quoted by the Financial Times, said the plan would tackle the problem of Greece's decentralised budget policy by transferring some powers to European institutions.

In Brussels, the European Commission also said there was no question of Athens surrendering budgetary control.

"The Commission is committed to further reinforcing its monitoring capacity and is currently developing its capacity on the ground," said economic affairs spokesman Amadeu Altafaj.

However, such key decisions "must remain the full responsibility of the Greek government," he added.

The government in Athens was "accountable before its citizens and its institutions," he said.

"That responsibility lies on their shoulders and it must remain so."

Greek leaders meanwhile held more talks Saturday with private creditors on a writedown of part of the country's debt.

Greece is trying to wrap up a deal with private creditors in which they would accept a 50-percent cut on the 200 billion euros in debt they hold. Talks have so far stalled on the amount of interest to be paid on the remaining debt.

Prime Minister Lucas Papademos and Finance Minister Evangelos Venizelos led the 90-minute talks with Institute of International Finance (IIF) chief Charles Dallara ahead of the European summit on Monday.

After the two-hour meeting, Dallara and colleague Jean Lemierre said in a statement, they were "close to the finalisation of a voluntary PSI."

"We expect to conclude next week as discussions on other issues move forward," it added.

Venizelos told reporters he was hopeful of a deal within days.

"We have prepared all the technical and legal texts, and major progress has been made. ... In principle we will conclude (an agreement) next week."

Venizelos also held another meeting with representatives of the international troika made up of the European Commission, the European Central Bank and the International Monetary Fund, that are trying to make Greece's 350-billion-euro debt mountain sustainable by 2020.

The talks were to focus on the austerity measures and deregulation demanded by the troika in order to release the second bailout, initially agreed in October, for 130 billion euros.

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