Greece pressured to bolster cuts for debt deal
October 15, 2012, 5:08 pm TWN
ATHENS -- Greece was under pressure from international creditors to beef up a controversial austerity package in return for loan relief, officials said as Prime Minister Antonis Samaras reported that a deal was in sight.
Samaras told Kathimerini daily on Sunday that the cuts could be approved by parliament “in a matter of days” after a European summit on Oct. 18 that will discuss Greece's economic situation.
He added that by Oct. 18, his government and a mission of EU-IMF auditors “will have fully concluded an agreement on fiscal and structural prior actions” required to release 31.5 billion euros (US$41 billion) in loans pending since June.
Greece has been in negotiations with the so-called troika of creditors — the EU, IMF and the European Central Bank — for the last three months.
The government thought that a new austerity package worth 7.8 billion euros (US$10 billion) this year would be enough to unblock the loans.
But the troika are now demanding 9.2 billion euros in savings according to the finance ministry.
“We say 7.8 billion euros, they say 9.2 billion. We have to converge,” a finance ministry source said after talks with the auditor mission on Saturday.
The EU-IMF auditors say a greater-than-foreseen recession will undermine the government's forecasts, as will the need to support a new state health organization that is deeply in debt.
And still, the effort seems in vain.
Despite attempts to trim it through a write-down, Greece's debt is expected to increase from 169.5 percent of output in 2012 to 179.3 percent in 2013 according to next year's draft budget.
Athens has committed to cutting its debt levels to 120 percent of output by 2020.
Instead, the ECB and the IMF believe that Greece's debt will be some 140 percent of gross domestic product (GDP) in 2020 while the European Commission is more optimistic, seeing a level of 128 percent, German magazine Der Spiegel reported on Sunday.
Greece is seeking a two-year extension from its creditors in order to apply the cuts and reforms, a breather the IMF is prepared to grant but which some eurozone states say will require more money for struggling Athens.
The government has so far calculated an austerity effort of 13.5 billion euros in 2013-2014.
“But if an extension is not granted, measures worth 18.5 billion euros would be necessary,” a Greek finance ministry source said.
Spreading out the reforms over four years to 2016 would increase the bill for Greece's creditors by some 30 billion euros, Spiegel said, without citing sources.
Athens counters that the figure is closer to 12 billion euros.
Greek ministers have argued that this sum could be saved if the European Central Bank agreed to roll over Greek bonds in its possession, or to lower interest rates on them.
But the ECB has dismissed the idea as monetary financing of states that is forbidden under its charter.