Troika wants faster cuts

The troika is demanding that Greece increase the amount of spending cuts it will make next year by more than 1 billion euros in order for the country’s lenders to approve the austerity package the government has put together.

Kathimerini understands the European Commission, European Central Bank and International Monetary Fund want to increase the frontloading of the measures because they believe the Greek economy will perform worse than forecast in the draft 2013 budget presented by Finance Minister Yannis Stournaras this week.

The government predicted that the recession will reach 3.8 percent of gross domestic product next year but the troika believes that the contraction is likely to be as high as 5 percent, Finance Ministry sources said.

This has prompted visiting inspectors to ask the Greek side to increase from 7.8 billion euros to as much as 9.2 billion the amount of cuts to be implemented next year. The total package is worth about 13.5 billion euros.

The troika thinks this will lead to Greece wiping out its primary deficit next year but not achieving a primary surplus of 1.1 percent of GDP, as forecast by Stournaras.

The extra savings are likely to come from the scrapping of the Christmas, Easter and summer payments that civil servants receive. These amount to 1,000 euros per year and stopping their payment will save roughly 600 million euros annually. Farmers’ pensions, the lowest in Greece, are also likely to be slashed by 30 euros a month from next year.

The Greek side hopes that an agreement on these measures will lead to a deal being concluded by Monday, when eurozone finance ministers are due to meet. The troika has indicated that if Greece adopts the extra measures next year, inspectors will be willing to drop their objections to the savings Athens forecasts it will make from structural reforms. “There is still a large gap, we are trying to reach a compromise to seal a deal,” Stournaras said.

Sources also revealed Wednesday that the International Monetary Fund’s resident representative in Athens, Bob Traa, has been in talks this week with representatives of companies in the fuel sector to discuss ways of increasing competition after a draft IMF report indicated that Greeks paid about $1 billion more per year for fuel than they should. The IMF wants to see the sector liberalized and independent gas stations not have to maintain large inventories.


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