Greece is in an unfortunate situation - Tonio Fenech

Finance Minister Tonio Fenech believes Greece's plans to restructure its economy and sort out its finances over the next few years is credible, although he said questions were being asked whether enough was being done by Athens.

"From the discussions we've had at this stage, yes, I believe the Greek plan is credible, although there is a question of whether it is enough. If it is not, the Greek government has made it clear on a number of occasions that it will do what is necessary," Mr Fenech told The Times Business.

Greece's fiscal deficit stands at 12.7 per cent of GDP, while its debt amounts to 113 per cent of GDP, both well over the Maastricht criteria of three per cent and 60 per cent respectively. Greece's serious financial situation has, not surprisingly, caused unease among the eurozome members.

Mr Fenech points out that what is happening in Greece is naturally of concern to him.

"The eurozone is made up of a number of countries which have agreed to work together through the stability and growth pact to support the single currency. Greece has a number of things to do to set its house in order, to restore stability not only in the Greek economy but also in the eurozone economy, and so as a Finance Minister within the eurozone what is happening in Greece is of concern to me."

The EU summit held two weeks ago promised "determined and co-ordinated action" should the euro come under threat, but there were no details and many analysts say the eurozone's rescue plan for Greece is flawed. Why has the EU been so vague about how it intends to help Greece?

"Greece has not come to the eurozone and asked for financial support. Such speculation by analysts that Europe's plan is not a sufficient one is a bit flawed because there is no contemplation of a plan. Greece has not made a request for funding. And if Greece implements the measures that they have promised - and to further implement measures if needed - such as to address their deficit shortfall - the target is to reduce it from 12.7 per cent to 8.7 per cent by this year - then the situation in Greece would restabilise," he points out.

The eurogroup's position, Mr Fenech explains, was that should all things fail the governments would co-ordinate support when and if required, but at this point nobody is seeing the need for that.

It is really not clear whether the EU is in fact allowed to bail out fellow member states. Article 122 of the Lisbon Treaty says other European states may come to the fiscal aid of another state if the latter is suffering fiscal difficulties caused by "exceptional circumstances beyond its control". What is the feeling among the minister's EU counterparts about this possibility?

"The EU states believe in a co-ordinated support. That means there has to be a formalised arrangement between the member states over how this would be done. The stability and growth pact does not set out specific rules of how this will be done and leaves the decisions to the individual member states," he says.

Mr Fenech reiterates, however, that at this stage EU ministers have not discussed this possibility. There is also an agreement on an EU mission to be carried out over the next 30 days - between the European Commission, the European central Bank and with the support of the IMF - to assess the implementation of the measures announced by the Greek government, and also to give confidence to the markets that Greece is addressing its financial issues. "Should the assessment show that not sufficient enough measures have been taken, then the eurogroup finance ministers will be presented with additional measures to be able to counter this situation," he says.

Should a bailout take place, nevertheless, most observers believe it will be Germany that will bear the brunt of the costs. Mr Fenech is cautious about this possibility, and doesn't completely exclude some sort of help by the International Monetary Fund.

"I wouldn't like to single out Germany but in reality there is already a world model of collaboration in times of crisis. The IMF was specifically created to support countries which encounter difficulties. During the global financial crisis various countries were supported and the argument why certain countries were being bailed out was made.

"We also faced this argument in Malta when the Maltese government signed - through the Central Bank - an extension of another €120 million in terms of a facility for the IMF. Ultimately, unless we have such institutions, and also unless the eurozone states collaborate in such moments of crisis, the impact will also be on the Maltese economy just as it will be on other eurozone economies. While I appreciate the public's sentiment in this sense, strengthening the euro is important for all the people who live within the eurozone," he says.

Should the IMF intervene, would this not be a blow to the eurozone's pride? If California went bust, for example, the US would not go to the IMF.

"California is part of the US which has a Federal Reserve Bank for all the US and they have a federal budget. We do not have a eurozone federal budget. The EU is not a United States. One argument is that the eurozone contributes to the IMF approximately €500 billion for such contingencies, so what's wrong with a eurozone member tapping into that source? Another argument is that Greece should be dealt with from within the eurozone in order to support the single currency, and that is also a valid argument. The bottom line, however, is that Greece has neither asked for IMF support nor support from its EU counterparts," he says.

Mr Fenech does not believe the lack of an economic union within the eurozone is to blame for the Greek crisis.

"The concept was for each member state to retain its fiscal sovereignty, however the strength of the euro would be the stability and growth pact, which means that fiscal policy within each member state would ensure the stability of the currency.

"Greece is in an unfortunate situation, in the way its debt has escalated and been exposed, but I believe the stability and growth pact is working and has kept various eurozone economies in order.

"We believe that if Greece does converge to the pact, stability will be regained."