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Europe

Debt inspectors to return to Athens next week

Text by News Wires

Latest update : 2011-09-20

International debt inspectors will return to Athens next week to review the government's progress on budget goals after two days of high-stakes talks, suggesting Greece's creditors have agreed to continue helping the cash-strapped nation.

AP - International debt inspectors will return to Greece next week to resume a review of the cash-strapped government’s austerity program after making progress late Tuesday in a teleconference with the Greek finance minister, officials in Athens and Brussels said.

The decision implies that Greece managed to convince the troika it will be able to meet its budget targets – a precondition for continued payment of the rescue loans that are shielding the country from bankruptcy.

“Good progress was made, and technical discussions will continue in Athens over the coming days,” a European Commission statement said after the two-hour talks. “The full mission is now expected to come back to Athens early next week to resume the review, including policy discussions.”

A spokesman for the commission declined to say whether Greek Finance Minister Evangelos Venizelos offered new measures beyond what has already been announced.

Earlier, global stocks had edged higher on hopes a deal could be struck in the call – the second in two days – allowing release of the next batch of bailout funds.

The next €8-billion ($11 billion) installment had been expected in September, but the country’s creditors have said a decision on whether to disburse it will not be made until early October.

Without that money, Greece’s cash reserves will run out around mid-October, forcing a default that could plunge Europe’s banking system into turmoil.

Greece has been depending on a €110 billion ($150 billion) rescue loan package since May 2010, after its borrowing costs went through the roof following revelations Athens had been underreporting data on an alarmingly bloated budget deficit and public debt.

Most analysts still think the country will have to restructure its debts at some point, especially if the economy remains mired in recession. Fitch Ratings said in a report Tuesday that it expected Greece to eventually default, but to do so while remaining in the eurozone.

Some experts believe the country will have to drop out of the 17-nation euro, a notion Venizelos dismissed.

“Greece’s participation in the eurozone and the euro is an irrevocable and fundamental national choice that the Greek population is making sacrifices to safeguard, in full knowledge of how priceless it is,” Venizelos told journalists, rejecting a Greek newspaper report that the government was considering a referendum on the issue.

German Chancellor Angela Merkel has likewise had to quell fears of a euro break-up, a scenario elected officials in her own government speculated about last week, roiling financial markets.

Prime Minister George Papandreou plans to meet Merkel next week during a visit to Berlin, a German government official said. The official, who spoke on condition of anonymity because the meeting hasn’t yet been announced officially, said the two would talk on the sidelines of the Federation of German Industries’ annual meeting on Sept. 27.

On Wednesday, Papandreou will chair a ministerial meeting expected to focus on the outcome of the teleconference.

Inspectors from the IMF, ECB and Commission suspended their quarterly review of the country’s progress earlier this month, amid talk of missed targets and delayed implementation of reforms.

The Socialist government has already taken a series of highly unpopular austerity measures over the past 20 months, cutting public sector pay and pensions and hiking taxes and retirement ages. Unions have responded with strikes and demonstrations.

Hundreds of civil servants demonstrated peacefully in central Athens, while about 250 high school students marched in a separate protest against shortages in schoolbooks and other supplies at state-run schools. Public transport workers have called for a daylong strike Thursday, while air traffic controllers have declared a 24-hour strike Sunday and a four-hour work stoppage on Sept. 28.

Economizing efforts so far have proved to be not enough to tackle the country’s severe debt and deficit crisis. In July, European countries agreed to extend a second bailout, worth €109 billion, to Greece. However, the details of the second rescue package, which includes voluntary bond rollovers, have still to be worked out.

On Monday, the IMF representative in Greece, Bob Traa, said Greece needed to speed up its reforms in tax collection and reduce the size of the overmanned public sector.

 

Date created : 2011-09-20

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