Greece is currently under heavy scrutiny by international monitors assessing whether Prime Minister George Papandreou has fulfilled the terms of his country’s bailout agreement.
Inspectors for the European Union and the International Monetary Fund will hold a teleconference at 7 p.m. Athens time with Greek Finance Minister Evangelos Venizelos, announcing whether the government has taken the necessary steps, under the terms of its bailout, to be eligible to receive its next aid payment, due next month, and whether it is on track for a second rescue packaged approved by EU leaders on July 21.
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Greece is struggling to prove that it has done enough to receive its sixth tranche of aid, which the government needs in order to prevent default. Earlier this month, EU and IMF monitors suspended their review after discovering an unexpected hole in the budget. Venizelos announced yesterday that some measures in the five-year 78 billion-euro medium-term budget plan adopted in June might have to be brought forward to meet current targets.
Greece must be found in “full compliance with the agreed targets” in order to receive its aid money, said Amadeu Altafaj, economics spokesman for the European Commission. Venizelos has said that his state has to become “smaller and smarter”, and will focus on spending cuts for the 2012 budget rather than taxes, which he says can’t be “incessantly” imposed because of the inefficiency of the tax collection system.
Greece has three main goals, according to Venizelos: to meet budgetary targets for 2011 and 2012, to create a primary surplus, and to pursue structural reforms in order to shield the country. Venizelos says the economy will shrink 5.5% this year and continue its contraction next year. His goal is to still achieve a primary surplus of 3 billion euros in 2012.
But Bob Traa, the IMF’s resident representative in Greece, says additional measures are needed to reduce the deficit to a sustainable level, though he added that the IMF disagreed with the view that the program carried out by Greece’s government thus far has been unsuccessful. “Impressive fiscal consolidation has happened,” said Traa. However, he doesn’t expect Greece to return to growth until 2013, with economic output expected to decline 2.5% in 2012.
Last week, Papandreou promised a “decisive battle” for budget cuts to persuade European governments and the IMF to released the next 8 billion-euro loan installment. Greece is now waiting on the next meeting of euro-zone finance ministers, on October 3, for a decision on the release of the installment. The loan, which would be disbursed in mid-October, would enable the government to pay its bills through the end of the year. Without the loan, Greece has the cash reserves to cover only its needs for October.