Finance Minister George Papaconstantinou on Monday met with a visiting delegation of EU-ECB-IMF "troika" representatives, who arrived in Athens for a regular inspection of the Greek economy ahead of the approval of a third tranche (9 bln euros) of a support loan to Greece in December.

Speaking to reporters after the meeting, ministry officials said the meeting focused on technical issues and covered the execution of the current budget and provisions for the 2011 budget, along with progress in all-important structural reforms.

The "troika" representatives will remain in Athens for a week to tour other crucial ministries related with the 110-billion-euro memorandum, as well as the Bank of Greece, the independent Hellenic Statistical Authority, the State Accounting Office and social agencies.

In the wake of an upward revision of the country’s fiscal deficits (15.4 pct of GDP in 2009 and 9.4 pct of GDP in 2010) along with a shortfall in budget revenues -- totaling 2.0 billion euros this year -- troika officials are reportedly demanding additional austerity measures, including an immediate reduction of the wider public sector by 30 pct, the closing loss-making state-run utilities and enterprises, along with municipal enterprises (along with employee lay-offs), the long-expected opening of so-called "closed professions", bolder interventions in the labour market (i.e. replacing all sector and private contracts), drastic spending cuts in defence, health, education and more reforms in the pension system.

The ministry is opposing any new measures, with one officials noting that “a drastic cut of the fiscal deficit by 2014 will be made in a balanced and fair way, according to commitments undertaken by the country. It will not happen with additional cuts in salaries and pensions, or with higher taxes beyond those already announced. It will be made through a restructuring of state spending”.

The government is examining plans to readjust VAT rates or to equalise taxes on petrol and heating oil. At the same time, the government is seeking the troika’s approval to cut VAT rates in certain sectors of the economy, such as the tourism sector.

The finance ministry is also seeking a larger decrease in spending by state hospitals, healthcare, public sector enterprises and municipalities, under the supervision of the troika. Specifically, the government said that from a 3.8-billion-euro increase of the fiscal budget in 2009, 3.7 billion accounted from the wider public sector, while from the 3.5 billion euros increase of the budget deficit for 2010, 3.4 billion also accounted from the wider public sector.

Ministry officials said any new scenarios will be finalised before the government tables its draft 2011 budget to Parliament on Thursday, which will be followed by a new tax draft bill. Finance Minister George Papaconstantinou will brief his EU counterparts during a Eurogroup and Ecofin meetings on Tuesday and Wednesday.

 

Eurostat figures

Eurostat revised the country’s fiscal deficit for 2009 upwards to 15.4 pct of GDP, up from 13.6 pct in April, along with the country’s public debt to 126.8 pct of GDP, up from 115.1 pct in April.

On a positive note, the EU executive’s statistics agency, in an announcement, said it withdrew all reservations regarding the quality of Greek statistics.

Eurostat said Greece’s fiscal deficit totaled 9.4 pct of GDP in 2008, up from 6.4 pct in 2007 and 5.7 pct in 2006, while the country’s public debt rose to 110.3 pct in 2008, 105 pct in 2007 and 106.1 pct in 2006.

Greece has the highest fiscal deficit in the EU, followed by Ireland (14.4 pct), the UK (11.4 pct), Spain (11.1 pct), Latvia (10.2 pct) and Portugal (9.3 pct). Luxembourg (0.7 pct), Sweden (0.9 pct) and Estonia (1.7 pct) recorded the lowest fiscal deficits.