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Sixth year of recession forecast as Greece meets with creditors

Text by FRANCE 24

Latest update : 2012-10-01

Debt-burdened Greece resumes key talks Monday with its international creditors -- the EU, International Monetary Fund and the European Central Bank -- as the government prepares to present a draft budget forecasting a sixth year of recession.

Debt-burdened Greece resumes key talks Monday with its international creditors -- the EU, International Monetary Fund and the European Central Bank -- as the government coalition prepares to submit a draft budget forecasting continuing recession to parliament.

Finance Minister Yannis Stournaras will meet Monday with officials from the so-called troika of international creditors, which will decide whether Greece’s planned budget cuts are sufficient to earn it an additional €31.5 billion ($40.5 billion) in loans under the country's bailout plan.

Greece’s latest package of deep budget cuts will also be submitted to parliament on Monday, alongside a draft 2013 budget that forecasts a sixth year of recession with a 4% contraction, according to the state-run Athens News Agency.

In remarks to the centre-left weekly To Vima newspaper on Sunday, Prime Minister Antonis Samaras said Greece is desperate for the next round of funding.

"The Greek economy awaits this money like parched earth awaits the rain," he said.

The next tranche of troika loans, part of a €130 billion bailout, has been suspended since May as fiscal reform ground to a halt with Greece’s paralysing political crisis. The country held two elections before the current government was formed in June.

Greece seeks concessions

The coalition Samaras leads has been trying to jumpstart a privatisation drive and encourage a consolidation of the country's underwater banking sector. On Monday France's Credit Agricole revealed that it was in exclusive talks to offload its Greek subsidiary Emporiki to Greece's own Alpha Bank, under terms that would first call for the French giant to inject hundreds of millions into the beleaguered bank.

Alpha is offering to take over Emporiki for the symbolic price of €1, but Credit Agricole would have to invest another €550 million ($710 million) to recapitalise the subsidiary first. The French lender would also subscribe to €150 million in convertible bonds issued by Alpha.

The conservative Samaras government has been working for the past week on finalising a new austerity package worth €13.5 billion, despite often violent public protests against the deep cuts to public finances. He must first overcome resistance from his socialist and moderate leftist allies, who have balked at sweeping new cuts as the nation faces a third year of austerity.

His coalition partners want Samaras to extract as many concessions as possible from the troika, including a two-year deadline extension to 2016 to ease the burden of the fiscal overhaul.

Without the deadline extension, some fear Greece could be forced into a chaotic default on its debts that would lead it to being kicked out of the eurozone.

But German and French leaders have repeatedly voiced scepticism about granting Greece any new concessions. Athens has at times faltered in the speed and effectiveness of implementing the agreed reforms.

To win back confidence, we must fulfil expectations,” German Chancellor Angela Merkel said after talks with Samaras in late August, adding: “[We], of course, expect from Greece that the commitments that were made be implemented, that deeds follow words.”

(FRANCE 24 with wires)


Date created : 2012-10-01


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