Mon, Sep 19, 2011 - Page 10 News List

Greek leader cancels trip to US

ABOUT-TURN:Papandreou was meant to meet Ban Ki-moon and Christine Lagarde, but instead decided to return to Greece, where the debt crisis continues to deepen

Reuters, ATHENS

Greek Prime Minister George Papandreou canceled a planned visit to the US on Saturday to deal with a deepening crisis at home, days before international inspectors arrive to go over fiscal shortfalls.

Papandreou was in London, en-route to attend UN and IMF meetings, when he decided to turn back after discussing developments with Greek Finance Minister Evangelos Venizelos, government officials said.

“The prime minister judged that he should not be away. He wants to ensure that all of Greece’s commitments [to its EU partners] are fulfilled,” government spokesman Ilias Mossialos said.

A government official speaking on condition of anonymity said pressure was high on Athens from eurozone partners to take additional measures to merit continued funding from a 110 billion euro (US$150 billion) bailout to avert default.

“There is an issue of trust. Our partners want very specific steps and commitments and our record so far unfortunately does not inspire confidence,” the official said.

Next week, Greece is scheduled to resume talks with EU and IMF inspectors who will judge fiscal progress before releasing the next 8 billion euro loan tranche next month. Greece has said it has cash until next month.

“It’s a sign that things are very tight. Papandreou’s presence is crucial to make sure there are no setbacks with issues that need to be resolved,” said Theodore Krintas, head of wealth management at Attica Bank.

Fiscal slippage this year, which the government blamed on a deeper-than-projected recession, forced the government to slap a levy on property to make up for the shortfall as a target of capping its budget deficit at 7.6 percent of GDP looked out of reach.

Lenders have long warned against one-off measures and more growth-stifling taxes as a way out of the crisis shaking the euro. They have asked for urgent reforms and privatisations and a drastic shrinking of the bloated public sector.

EU economic and monetary affairs Commissioner Olli Rehn has said inspectors from the European Central Bank, EU and IMF would report back on progress early next month, meaning that the next disbursement of aid to Greece could be paid by the middle of next month.

Apart from the slow pace of reforms and fiscal slippages, lenders remain also concerned with the lack of political consensus as the main conservative opposition New Democracy party insists on the -renegotiation of the bailout deal.

Opinion polls show New Democracy ahead of the ruling socialists as a public exasperated with two years of austerity resists further measures and snap elections are on the horizon.

A second 109 billion euro bailout agreed in July, after it became clear Greece would not be able to return to bond markets, has also hit snags. Partners are asking for collateral before giving Athens more cash and banks are slow to participate in the bond swap scheme.

Papandreou had been scheduled to meet UN Secretary-General Ban Ki-moon in New York yesterday and IMF head Christine Lagarde tomorrow. Venizelos is still due to attend an IMF meeting in Washington later in the week.

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