Exclusive: Germany wants Greece to give up budget control

By Noah Barkin

BERLIN (Reuters) - Germany is pushing for Greece to relinquish control over its budget policy to European institutions as part of discussions over a second rescue package, a European source told Reuters on Friday.

"There are internal discussions within the Euro group and proposals, one of which comes from Germany, on how to constructively treat country aid programs that are continuously off track, whether this can simply be ignored or whether we say that's enough," the source said.

The source added that under the proposals European institutions already operating in Greece should be given "certain decision-making powers" over fiscal policy.

"This could be carried out even more stringently through external expertise," the source said.

The Financial Times said it had obtained a copy of the proposal showing Germany wants a new euro zone "budget commissioner" to have the power to veto budget decisions taken by the Greek government if they are not in line with targets set by international lenders.

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

Under the German plan, Athens would only be allowed to carry out normal state spending after servicing its debt, the FT said.

"If a future (bail-out) tranche is not disbursed, Greece cannot threaten its lenders with a default, but will instead have to accept further cuts in primary expenditures as the only possible consequence of any non-disbursement," the FT quoted the document as saying.

The German demands for greater control over Greek budget policy come amid intense talks to finalize a second 130 billion-euro rescue package for Greece, which has repeatedly failed to meet the fiscal targets set out for it by its international lenders.

CHAOTIC DEFAULT THREAT

Greece needs to strike a deal with creditors in the next couple of days to unlock its next aid package in order to avoid a chaotic default.

"No country has put forward such a proposal at the Eurogroup," a Greek finance ministry official said on condition of anonymity, adding that the government would not formally comment on reports based on unnamed sources.

The German demands are likely to prompt a strong reaction in Athens ahead of elections expected to take place in April.

"One of the ideas being discussed is to set up a clearly defined priorities on reducing deficits through legally binding guidelines," the European source said.

He added that in Greece the problem is that a lot of the budget-making process is done in a decentralized manner.

"Clearly defined, legally binding guidelines on that could lead to more coherence and make it easier to take decisions - and that would contribute to give a whole new dynamic to efforts to implement the program," the source said.

"It is clear that talks on how to help Greece get back on the right track are continuing," the source said. "We're all striving to achieve a lasting stabilization of Greece," he said. "That's the focus of what all of us in Europe are working on right now."

(Reporting By Noah Barking; Additional reporting by George Georgiopoulos in Athens and; Adrian Croft in London; writing by Erik Kirschbaum; editing by Andrew Roche)

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Night raids, prison control stymie U.S.-Afghan deal

AppId is over the quota AppId is over the quota 

U.S. military officer 1LT Adam Ferree (C), 1st Pltn leader, from Alpha Co, 2nd Battalion 35th Infantry, Task Force ''Cacti'' gives a command to the rear plank during a joint military patrol in Walay valley, near the Afghanistan-Pakistan border in Kunar province, October 2, 2011.

Credit: Reuters/Erik De Castro

By Susan Cornwell

WASHINGTON | Fri Nov 4, 2011 4:28pm EDT

WASHINGTON (Reuters) - A U.S.-Afghan strategic partnership agreement is being held up by Afghan demands for limits on "night raids" against insurgents and for a timeline for Afghans to assume control over detention centers, sources following the talks told Reuters.

Secretary of State Hillary Clinton said last week that the two nations had agreed on as much as 90 percent of the substance of the keystone deal. It is intended to provide a framework for the future U.S. role in Afghanistan as control over security is gradually transferred to the Afghans.

While U.S. officials had hoped to unveil the document for an international conference in Germany on December 5, disputes over controversial night raids on Afghan homes and the running of detention centers could delay it well beyond that date, congressional staff who follow the issue say.

"I think a more realistic expectation is now at NATO in Chicago," one congressional aide said, asking not to be named, referring to a NATO summit planned for May 2012.

The sticking points are more evidence of strains in the U.S.-Afghan relationship as Western combat forces start leaving. Afghan President Hamid Karzai has repeatedly criticized Western military tactics and said recently that Afghanistan would back neighboring Pakistan if it went to war with the United States.

Under an international agreement reached last year, local Afghan forces are to be in charge of security by the end of 2014, as Western forces withdraw. Thirty-three thousand of nearly 100,000 U.S. troops will leave by next September.

But the West will likely fund Afghanistan's police and army for years to come. Clinton made clear the United States would continue playing a role in security.

"We anticipate having a transition that does include security components, not only from the United States, but also from NATO," she told lawmakers last week.

U.S. Ambassador Ryan Crocker and General John Allen, who commands U.S. and NATO forces there, are working through some of the security cooperation issues with Karzai, Clinton said.

A U.S. military official, speaking on condition of anonymity, said the partnership document would agree to an extended U.S. troop presence in principle, and it might define broadly what types of things troops would do beyond 2014.

But the details such as troop numbers would be worked out in a subsequent "Status of Forces" agreement, he said.

HATED MILITARY TACTIC

Night raids, in which soldiers search Afghan homes for militants under the cover of darkness, have long been one of the most hated foreign military tactics in Afghanistan. Karzai has repeatedly denounced them and pushed for them to be halted altogether.

Many western military commanders see them as an important tool against the Taliban and other insurgents, however.

But some of the raids are led by Afghan forces. Afghan commanders must sign off on all raids, Afghan forces are often present for them and lead at least 25 percent of the raids, according to a recent report by the Open Society Foundations, which is backed by philanthropist George Soros, and The Liaison Office, a Kabul-based nongovernmental organization.

U.S. officials want to make transfer of authority over detention centers in Afghanistan "conditions-based," the congressional staffer said. In particular, they want to make sure detainees now held by foreign forces will be properly treated when they are transferred to Afghan control.

NATO has already stopped sending prisoners to some Afghan jails because of U.N. warnings of torture there.

A U.N. report last month said that Afghanistan's intelligence agency and police force have been "systematically" torturing detainees, including children, at a number of jails. The Afghan government rejected many of the allegations but conceded there may have been abuse.

The Washington Post reported last week that CIA, U.S. military and State Department officials were warned of abuses at one Kabul prison run by the Afghan intelligence service, but continued to transfer prisoners to the service's custody.

The United States is also concerned about the security of Afghan prisons. In April, hundreds of prisoners escaped from a jail in Kandahar in Afghanistan's southern Taliban heartland.

"The detainee issue is pretty difficult to resolve. I don't think we or the Afghans feel a lot of pressure to conclude this (agreement) quickly," said Bruce Riedel, a former CIA official who chaired Obama's 2009 review of Afghan war policy.

A State Department official would not comment on the talks' substance, but said there was no hard deadline for the deal.

"We look forward to coming to agreement soon, but we are committed to the right agreement, not fast agreement."

(Additional reporting by Missy Ryan; Writing by Susan Cornwell; Editing by Warren Strobel and Eric Walsh)

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