Not So Fast: Troika Says No Deal Yet

Greece’s international lenders have rebuffed Finance Minister Yiannis Stournaras’ declaration  that Greece had concluded a deal with its international lenders on a $17.45 billion spending cut and tax hike plan needed to release a delayed $38.8 billion installment to keep the country going, saying there were still disagreements pending.
Stournaras has been negotiating with the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) for months on the package, at the same time Prime Minister Antonis Samaras has been having trouble convincing his reluctant partners, PASOK Socialist leader Evangelos Venizelos and Democratic Left chief Fotis Kouvelis to accept harsh changes to labor rights, including the reported firing of 65,000 workers over three years, deep cuts in severance pay, and a six-day work week, among further austerity measures.
Stournaras said the tough negotiations had ended with concessions on both sides. He said that Greece would get an extension, said to be two years, to meet fiscal targets to reduce its deficit from 9.3 to 3 percent and implement other long-delayed reforms, such as ending the monopoly a number of professions hold, including lawyers, architects, engineers and pharmacists.
IMF officials said there had been progress but no deal and EU officials also said there was still a gap to be closed. The Troika has to sign off on the proposal before Samaras can send it to the Parliament his government controls, but Venizelos is seeing defections and at least one Democratic Left lawmaker said he would not vote for more austerity.
“There has been progress in recent days, but some outstanding issues remain to be agreed upon to reach full staff-level agreement. Furthermore, financing issues will be discussed between the official lenders and Greece,” an IMF spokesperson said. The brief IMF statement confirmed the EU’s insistence earlier that there was no deal,
Greece is surviving on a first series of $152 billion in bailout loans and awaiting a second for $173 billion that has been delayed until the new austerity budget for 2013-14 is passed. The EU now reportedly believes that it will take at least another 10 years before Greece can reduce its budget from 179 to 120 percent of Gross Domestic Product (GDP) because of lagging reforms and an uncompetitive economy in which people trying to open businesses face a nightmare of red tape and corruption.
Samaras wants to conclude talks and have the budget approved by Parliament before a Nov. 12 Eurozone meeting and has warned the country will go broke on Nov. 16 and be unable to pay its workers or pensioners without additional aid. He said he will eject New Democracy members from the party if they vote against it, as he has already done with one MP who defied him.
Even a two-year delay in meeting the demands would not come without cost as the government would need additional funds. The German newspaper Handelsblatt said the Eurozone, the 17 countries that use the euro, would give Greece another loan of between $20.8-$26 billion as a bridge, although that would pile on more debt, now already at $380 billion and unsustainable.
But some 85 percent of the next installment of $38.8 billion, or nearly $33 billion, is going to be set aside to recapitalize Greece’s failing banks, who, along with other investors, took a 74 percent loss on their holdings of Greek bonds when the previous government – with Venizelos as finance minister, forced them to accept it as part of a plan to write down the country’s debt. Samaras said he wants Greece to pay back bills amounting to nearly $10 billion, effectively using up the rest of the capital from the loan.
(Sources: Kathimerini, New York Times)