Stakes raised as Greece resumes bailout talks

Reuters, ATHENS

Tue, Jul 02, 2013 - Page 15

Greece and its international lenders were to resume talks yesterday to unlock 8.1 billion euros (US$10.5 billion) of rescue loans after a two-week break during which the government almost collapsed over redundancies at Greek state broadcaster ERT.

Greek Prime Minister Antonis Samaras has said he expects the talks to conclude successfully, despite setbacks to the country’s privatization program and delays in public-sector reforms.

To pressure Athens to deliver on reforms, the trio of lenders — the EU, the IMF and the European Central Bank — might refuse to pay the full sum in one go and break it up into three monthly payments instead, Greek media reported.

“The biggest issue in the negotiations will be the delays in public-sector reforms,” a senior Greek Ministry of Finance official told reporters.

Athens missed a deadline last month to place 12,500 state workers into a “mobility scheme,” under which they are transferred or dismissed within a year.

The country is battling through its sixth year of recession and the latest instalment is one of the last big cash injections it stands to get before the 240 billion euro bailout expires at the end of next year.

The stakes are high. If the talks fail, the IMF might have to withdraw from Greece’s rescue to avoid violating its own rules. Athens also needs to redeem about 2.2 billion euros of bonds next month.

Greek Minister of Finance Yannis Stournaras was to attend his first meeting with representatives of the troika at 2pm yesterday.

Samaras wants to wrap up the talks quickly for the funds to be released by the end of this month. He appointed two reformers, Kyriakos Mitsotakis and Adonis Georgiadis, in a Cabinet reshuffle last week to push for reforms at the key Greek ministries of civil administration and health.

“The lenders will give us trouble, but less so than in previous reviews,” one government aide told reporters on Sunday.

Athens plans to ask its creditors to lower this year’s privatization target of 2.6 billion euros after failing to find a buyer for natural gas company DEPA.

A shortfall of more than 1 billion euros has emerged at state-run health insurer EOPYY, meaning automatic spending cuts may have to be agreed on put it back on an even keel.

Athens and the troika are also at loggerheads over an unpopular property tax and a possible reduction in a sales tax for restaurants.

Samaras has ruled out imposing new austerity measures after losing a coalition partner in the ERT crisis, with his majority in the 300-seat Greek parliament shrinking to three votes.

More measures would be impossible to steer through parliament, analysts and lawmakers have said, after four years of austerity that plunged Greece into its deepest peacetime recession, with the jobless rate at a record 27 percent.

According to Greek officials, the country has enough spare cash to offset any short-term slippages in the bailout plan.

Helped by tight spending, the budget deficit was about 3 billion euros smaller than expected in the January-to-May period, Stournaras said last week, adding that the country also had money left over in bank rescue fund HFSF.

However, even if it clears this review, Athens will require additional help after the bailout ends.

According to provisional EU and IMF estimates for 2015 to 2016, Greece must plug a budget shortfall of about 4 billion euros and a funding gap of up to 9.5 billion euros. These estimates are to be updated later this year.