Greece's international lenders have agreed to provide the debt-ridden country with the third installment of a loan – valued at 9-billion euros -- but warned that the Greeks must make an extra effort to address its deficit next year.
Specifically, lenders have instructed the Athens government to agree to new measures to broaden tax bases and eliminate wasteful spending.
In May, the European Union (EU) and the International Monetary Fund (IMF) agreed to issue a bailout package worth up to 110-billion euros to Greece over three years.
Greece is seeking to cut its deficit to 7.5 percent of GDP in 2011 from the 15.4 percent level last year.
In a joint statement, the EU, IMF and European Central Bank (ECB) stated that Greece’s financial reform program remains broadly on track and that they expect the Greek economy to begin turning around in 2011.
The statement added: At the same time, data revisions for 2009 and weaker-than-projected revenue collection mean that an extra effort will be needed to meet the deficit target of 7.5 percent of GDP in 2011, which the government has reaffirmed.
The international lenders want Greece to implement some profound structural reforms, including improved tax collection, cuts in the national health service and the loss-making state-owned companies such as the railways.
The IMF believes many state-controlled companies are overstaffed and that employees are overpaid in some cases. Poul Thomsen, an IMF official, has warned of job cuts would have to be job cuts.
However, there is much skepticism that Greece can succeed with its draconian austerity measures (last week, the government released an austere budget for 2011 which seeks to reduce health and defense spending, and hike the sales tax on most retail items, among numerous other items).
Yanis Varoufakis, a professor of economics at Athens University told the BBC: “Greece is currently implementing a savage austerity package that will fail in both its aims. It will fail to arrest the ballooning debt crisis and it will do next to nothing to inflict righteous pain on the culprits”
Proposed spending cuts by the government have provoked violent street protests across the nation.
The next review of Greece's progress is scheduled for February.