Mon, Aug 20, 2012 - Page 15 News List

Greece must cut extra cash in next two years: report

SLIPPERY SLOPE:Greece’s economy is continuing to flounder and harsh cutbacks to government expenditure are hitting people hard, but more cuts are on the cards

AFP and AP, Berlin

Greece’s creditors say it must cut 14 billion euros (US$17 billion) from its budget in the next two years, 2.5 billion euros more than they originally demanded, German weekly Der Spiegel reported on Saturday.

The amount was revised upward as a result of the most recent audit mission by the country’s so-called troika of bailout lenders, the EU, the IMF and the European Central Bank, Der Spiegel said.

Troika auditors visited Athens recently and are expected to return next month, saying they expect to remain in the Greek capital for the entire month.

Based on that audit, the EU and the IMF are both to decide whether to release Greece’s next loan disbursement of 31.5 billion euros.

The Greek government is scrambling to slash its budget in order to access the funds, which it needs to keep it from defaulting on its debt and crashing out of the eurozone.

Der Spiegel said the troika had ordered the extra cuts because planned privatizations were not shaping up to be as lucrative as hoped and tax revenues were falling short of forecasts as the economy struggled through its fifth year of recession.

The auditors also said in a report that the government had so far been unable to show how it planned to reach the 11.5 billion euros in savings it had already pledged to find for next year and 2014.

Meanwhile, Greece is not set to leave the 17-nation eurozone, Luxembourg’s prime minister said, arguing in an interview published on Saturday that an exit would not be politically feasible and would also carry unforeseeable risks.

Greece has been kept afloat by international loans, but has fallen behind on implementing reforms and austerity measures demanded in exchange, fueling impatience in Germany and other prosperous nations and speculation about a possible euro exit.

However, Luxembourg Prime Minister, Jean-Claude Juncker, who also chairs eurozone finance ministers’ meetings, was quoted as saying in an interview with Austrian newspaper Tiroler Tageszeitung: “It will not happen — unless Greece violates all the conditions and keeps to no agreements.”

“In the case of a total refusal by Greece regarding budget consolidation and structural reforms, one would have to deal with the question,” he said, according to the report.

However, he added, “because I assume that Greece will try to redouble its efforts and achieve the targets that have been set, there is no reason to assume that this exit scenario can become relevant.”

Juncker said an exit would be “technically,” but not “politically” feasible and insisted: “We are not working on it.”

There is little enthusiasm among creditors such as Germany for granting Greece more time to fulfill the terms of its international aid packages or other concessions. Juncker said it was not possible to say whether Athens might be granted more time before a report next month from its debt inspectors, but he does not currently consider an extension “absolutely necessary.”

Germany’s vice chancellor, Economy Minister Philipp Roesler, said recently that the idea of Greece leaving the euro has “lost its horror.”

There has been no such talk from German Chancellor Angela Merkel or German Finance Minister Wolfgang Schaeuble, though they also have shown little appetite for concessions.

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