Greece vows austerity as aid tranche hangs in balance

By @ibtimes on

Greece pledged to take on as much austerity as needed to secure further aid and launched talks on Monday with its international lenders that may determine if it can avoid a default.

The International Monetary Fund (IMF) told Athens, which risks running out of cash next month, it must urgently implement reforms agreed under its EU/IMF bailout plan to qualify for the next 8 billion euro ($11 billion) rescue payment.

International inspectors, who must decide whether the loan tranche is handed over as scheduled in October, made clear patience was running out.

The ball is in the Greek court. Implementation is of the essence, the IMF's representative in Greece, Bob Traa, told an economic conference.

IMF inspectors were due to return to Athens this month but decided on a call on Monday instead, after EU finance ministers meeting at the weekend expressed doubts about Greece's ability to meet its obligations and exit the crisis rocking the euro.

Greece's finance minister said the country would do what was necessary to get more rescue funds, but would not allow itself to be a scapegoat for euro zone policymakers who had failed to deal with the region's debt woes.

Asked if Greece will get the sixth aid tranche, Traa said: That's what we are working on ... We are making progress but it would not be correct for me to speculate on this ... I don't have a crystal ball but we are working 24/7 to get it done.

His comments added to pressure for action on promised measures such as further cuts to Greek state salaries and pensions, firing public servants and shutting state organizations.

A dramatic cancellation of Prime Minister George Papandreou's trip to the United States on Saturday to deal with the debt crisis at home prompted fresh talk of a possible default and snap elections. Officials strongly denied both.

MORE CUTS FOR MORE FUNDS

Finance Minister Evangelos Venizelos and two other ministry officials began a conference call with the EU/IMF inspection team on Monday evening. The ministry said no announcement was expected after the call with the heads of the EU/IMF/ECB mission.

(The) conference call could last until the early morning hours tonight and be continued tomorrow or later, the ministry said, adding that a cabinet meeting Venizelos had said would take place after the call was off the schedule.

After a cabinet meeting on Sunday, Venizelos told reporters that Greece needed to make major decisions now to avoid bankruptcy and stay in the euro zone.

It is very crucial that Greece protects itself in such tense conditions. We should not allow ourselves to become the scapegoat or the easy excuse that will be used by European and international institutions in order to hide their inability to manage the crisis, he said.

Speaking on the sidelines of a conference near Athens, the minister expressed confidence Athens would qualify for its next bailout tranche in October.

We have the will, the determination and the commitment to implement all that is needed to meet our obligations vis-a-vis our partners who are also our lenders, he said.

The minister also said that cutting spending would be a priority of the 2012 budget, while predicting that the economy would shrink at a worse-than-expected pace of 5.5 percent this year.

Greek media published a list of 15 measures on Monday they said the lenders, known as the troika, were asking Athens to take immediately or risk losing the next tranche. Finance Ministry officials said the list was compiled internally and included steps already agreed with lenders in July.

The troika does not give us lists. It wants us to meet fiscal targets and asks us to spell out how we will do it, said a government official on condition of anonymity.

CRUNCH TIME

Analysts say it is crunch time for Greece, which must face up to the fact that unless it does what its lenders say, it may be unable to pay next month's salaries and pensions and other state expenses.

There was a big list in the medium-term fiscal plan but they need to be actually implemented and the deficit has to come down. Otherwise the next tranche could be withheld until the government does it, even after December, so there could be some disorderly default, said Citigroup's Giada Giani.

The measures have met resistance, not only from an austerity weary public taking to the streets but also from labor unions and even from within the ruling Socialist party.

Commerce can't stand any more measures... You are annihilating us, the Greek retail association ESEE told the government in a statement. You are leading the Greek middle class to full annihilation. Stop now.

ESEE said it would challenge in court a new property tax slapped on households on September 11 through electricity bills to plug a 2 billion euro budget hole this year.

EU officials, who have long warned against one-off taxes that stifle the economy, expressed doubts the tax would rake in the funds targeted in the face of public resistance and asked the government to take other steps, Greek officials said.

They doubt this tax will raise even 1 billion euros, a government official said. They want more measures to make sure we get that and a little more to be on the safe side.

(Additional reporting by Renee Maltezou, Lefteris Papadimas; Writing by Dina Kyriakidou and Michael Winfrey; Editing by Louise Ireland)

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