EU and IMF vow to pursue budget checks

Europe and the International Monetary Fund on Monday pledged to resume checks on Greece’s eligibility for more aid disbursements when a new Greek government emerges after voters split over the rescue conditions.

The European Commission in Brussels said it “hopes and expects” Greece will fulfill the budget austerity requirements for a loan payment due in June following the Sunday election.

The Washington-based IMF said, “We look forward to being in contact with the new Greek government once it has been formed.”

With the next European and IMF review of whether to keep aid flowing due around the end of May, Greece faces days of negotiations among party leaders to determine whether a coalition government can be created or a new election must be held. “Every government that is coming along will have to deal with how to schedule the reforms and implement them,” Michael Massourakis, chief economist at Alpha Bank SA in Athens, said in a Bloomberg Television interview on Monday. “It’s not a question of not implementing these reforms or not going through the fiscal adjustment process.”

Greece plans to sell 1 billion euros of 26-week treasury bills on Tuesday.

Acting Greek Finance Minister Filippos Sachinidis declined to comment on the country’s cash reserves when contacted by Bloomberg by phone on Monday. As with the first 110-billion-euro rescue, the new aid package for Greece from the euro area and the IMF involves quarterly reviews to ensure the government keeps narrowing a budget deficit that was more than five times the EU limit in 2009 and overhauls an economy in its fifth year of contraction.

The voter backlash against austerity in Greece, calls by Italian Premier Mario Monti for Europe to complement budget cuts with policies to spur economic growth and the victory in Sunday’s French presidential election of Socialist Francois Hollande have raised the prospect of more EU flexibility in enforcing limits on deficits.

EU Economic and Monetary Affairs Commissioner Olli Rehn also pointed to such a policy shift over the weekend. IMF Managing Director Christine Lagarde recommended Monday that developed nations pursue “gradual” fiscal cuts, saying in remarks prepared for a speech in Zurich, Switzerland, that “austerity versus growth is very much the debate of the hour.” [Bloomberg] – Ekathimerini.com