Athens calls down the wrath of Brussels
Greece is incurring the wrath of the European Community for alleged failure to comply with numerous EC market regulations, leaving Athens in a quandary as it struggles to spur its stagnant economy. The EC's most recent complaints involve possible Greek infractions of maritime pollution standards and taxes on car sales. But over the past four years, the community has also cited Greece for its foreign-exchange controls and its marketing of pharmaceuticals, petroleum products, bananas, and beer. In a number of these cases, Greece could face legal action at the European Court of Justice in Luxembourg.
``They [the Greeks] are the worst violator'' in the community, says one administrator in the EC directorate of internal markets. The Greek foreign ministry counters that Italy and France have been cited more often. But a Western diplomat here notes that ``even if you accept that other countries have been chided by the EC more in the past, Greece is quickly moving up in the queue'' of violators.
The EC is trying to eliminate trade barriers among its 12 member states, aiming for a ``borderless'' EC in 1992, with a free flow of goods and capital. But compliance with these free-trade regulations conflicts with Greece's need to tackle growing budget and trade deficits.
These deficits blossomed when, following socialist Prime Minister Andreas Papandreou's rise to power in 1981, business confidence eroded and the flight of capital from Greece became acute. Only this year has the government been able to stem the outward flow.
But in doing so, the Papandreou government apparently has bent EC law, as spelled out in the 1957 Treaty of Rome, to the breaking point.
Indeed, Greek transgressions seem to be foremost in the minds of EC officials in Brussels. ``We will attack whatever we can find in Greek legislation,'' another EC internal-markets administrator said late last month.
Officials at EC headquarters are now focusing on a topic that has the Greek press rumbling: automobile sales. The community has given the Athens government until Nov. 15 to present a plan that will change a tax system the EC says restricts imports of large German, French, and Italian cars into Greece.
These officials point to Greece's ``special consumption'' tax on smaller cars (cars with engines of less than 1,800 cc displacement). The lowest rate is 50 percent, while the tax on large-motored vehicles, such as a Mercedes or a BMW, runs as high as 270 percent.
``It has come to the point where the average car for a European is a luxury car in Greece,'' noted one EC spokesman.
Even the 50 percent rate makes car purchases prohibitive for many Greeks. According to Paul Laskaris of the Greek association of motor vehicle imports, a typical 1300 cc car with an ex-factory price of $6,500 sells for $21,000 here. With such prices, Greece has the lowest rate at which cars are junked (0.5 percent per year) and the fewest cars per capita (about one per nine people) in the EC. By comparison, one in three Europeans from EC member nations owns a car, and these Europeans scrap them at an annual rate of 5 percent. Americans take some 9.5 percent of their cars out of circulation every year, Mr. Laskaris says.
Community officials charge that these figures indicate Greece is overtaxing automobiles, violating at least the spirit of free-trade. But the EC's case against Greece, one official said, will have to focus on the levy for large cars.
``We can't take them to court simply for overtaxing,'' he said. ``We must construct a case of discrimination'' against large EC-made cars, citing the larger tax rates, he said.
The community may also try to show that Greece discriminates against the smaller EC-built cars in favor of Eastern European models. Indeed, there are a surprising number of Czechoslovak Skodas and Soviet Ladas contributing to the cacophony on Athens streets.
In the meantime, while Athens and Brussels hack away at these problems, the Greek car market has skidded to a halt. Greeks are loath to buy cars with the possibility looming that taxes will be slashed.
The potencial loss of car-tax revenues has also raised fears in the Greek finance ministry. The $525 million collected each year from car sales comprises almost 7 percent of total government expenditures. Any reduction of this amount would widen the hole in a budget that already runs a deficit of 15 percent of total gross national product.
Economists here say that, even at such levels, the Papandreou government has made significant strides recently in reducing deficits - by attracting capital back to Greece - and that it does not want to lose any ground. Banking reforms and the raising of interest rates to some 8 points above inflation (24 percent versus 16 percent) have made Greek savings accounts and commercial investment attractive again. These measures have also eliminated, at least in the short term, the need for EC loans.
The government's ability to sustain this progress will depend on the outcome of its legal battles with the EC and on the patience of an electorate that skeptically awaits the fruits of the new economic regime.