ATHENS: Greece’s negotiations with international lenders for desperately needed rescue funds some two weeks before bankruptcy looms are stuck, the IMF said yesterday, sending Greek stocks plunging. The International Monetary Fund said the talks were stalled over the conditions for financing Greece as it seeks a two-year extension to meet fiscal goals.
While Athens has made “good progress” on fiscal and structural reforms, IMF spokesman Gerry Rice said in Washington, “an understanding must also be reached between Greece and its creditors on financing terms consistent with debt sustainability.”
That news triggered a five percent drop in Athens’ main ATHEX stock index, which tumbled below the 800 point level to close at 761.24 points. Shares in banks, which are awaiting some of the rescue money to shore up their capital, were the worst hit, with the banking stocks sub-index down by 11.7 percent.
Greece, the IMF, the European Union and the European Central Bank, known as the troika, have been locked in discussions for weeks on revising terms for the country’s bailout after it fell short of targets which needed to be met for the release of the next installment of funds from the three lenders.
Athens has asked for the fiscal targets to be pushed back another two years, to give it more room to rekindle economic growth after a crushing austerity programme sent it into a deeper recession than the lenders had expected.
Greek Prime Minister Antonis Samaras has said the coffers in Athens will run dry on November 16 -- when a three-month treasury bill worth ¤5bn must be repaid — unless his country receives the next ¤31.2bn ($40.4bn) in rescue funding. Samaras had announced on Tuesday that his government had agreed with the mission of troika auditors in Greece on the terms of a new 13.5 billion euro austerity package needed to unlock the next instalment of rescue loans.
Accordingly, the finance ministry on Wednesday introduced a budget and a three-year economic programme pledging the required level of cuts in 2013-14. But on the same day the European Commission warned that a debt deal with Athens was still pending. Eurozone finance ministers are due to make a final decision on the payout by November 12. Finance Minister Wolfgang Schaeuble of Germany, Europe’s paymaster, noted that considerable progress had been made in the talks with Greece “but there is still a lot of work to do.” The 2013 Greek budget gives a grim picture of the outlook for the country.
It predicted that gross domestic product in Greece — already in its fifth year of recession—would shrink by 4.5 percent compared with a forecast of 3.8 percent a month ago, although below the 6.6 percent decline expected for this year. The 2013 public deficit forecast was raised to 5.2 percent from the previous prediction of 4.2 percent.
The government is planning ¤9.4bn ($12.2bn) in cuts which will affect mainly state wages, pensions and benefits that have already been drastically reduced over the past two years. But it will still need to borrow over ¤68bn next year, the draft budget said.
“If the deal does not pass... the country will be led to chaos,” Samaras warned. The IMF also pushed for wealthy Greeks to pay their fair share of the tax burden amid uproar in Greece over a list of alleged tax evaders.
AFP
