Talks between Greece and EU/IMF/ECB inspectors on whether it has met conditions for a new aid tranche have been put on hold, a Greek official said on Friday, a day after Athens admitted it would miss its budget deficit targets this year.
The talks will resume in 10 days, the official from the finance ministry official said. Greek officials had not previously suggested that there would be a pause in the negotiations with the team of EU/IMF/ECB inspectors.
The government and its international lenders said on Thursday that Greece will miss its budget deficit target this year, but they disagreed on how big the fiscal derailment would be and what was to blame.
Shares in Greek banks <.FTATBNK> fell as much as 7.3 percent on Friday after news of the deficit miss, underperforming modest declines on European markets, while spreads on peripheral euro zone debt widened against benchmark Bunds.
The first cycle of negotiations is completed. (The inspectors) will return in 10 days to see the budget plan for 2012 and conclude the procedure. Talks are not frozen, the official told Reuters.
The country's finance minister Evangelos Venizelos will hold a news conference at 5 a.m. EDT.
The dispute over fiscal slippage is complicating negotiations before release of the next aid tranche under a 110 billion euro bailout agreed last year to stave off the debt-choked country's bankruptcy.
EU/IMF inspectors visiting Athens feel Greece is not pursuing reforms vigorously enough, while Greek officials say the main reason for the overshoot is a worse-than-expected, austerity-induced recession.
An official close to the inspectors, also known as the troika, said on Thursday the 2011 budget deficit will be at least 8.6 percent of GDP compared to a target of 7.6 percent.
The talks have not halted, we are continuing, deputy government spokesman Angelos Tolkas told state NET radio. There are some crucial points in these negotiations which the government is defending.
(Reporting by George Georgiopoulos and Angeliki Koutantou; Editing by John Stonestreet)