Austria confident of Greek bailout

Debt-wracked Greece will more likely than not receive the next tranche of bailout cash it needs to stave off bankruptcy, Austria’s finance minister was quoted as saying on Sunday.

“The likelihood that the next €8-billion slice of aid will be paid out to Greece is, in my view, clearly higher than the likelihood it will not be paid,” Maria Fekter told Germany’s Welt am Sonntag newspaper.

She said Greece would fulfil the strict conditions set down by international auditors to secure the aid, the sixth tranche of a €110-billion bailout package, as Athens says it can only pay the bills until the end of the month.

“I assume that the people and government in Greece have understood how serious the situation is for them and how determined the Europeans are,” she added, calling for the authorities in Athens to play by the rules.

“It should not be the case that the payment of individual tranches of aid become a battle every three months because Greece threatens to fall short of the conditions,” she said.

In a speech in Berlin on Tuesday, Greek Prime Minister George Papandreou hailed his country’s “superhuman effort” in tackling its debt pile, amid growing social unrest as painful austerity measures bite.

Inspectors from the European Union (EU) and International Monetary Fund (IMF) returned to Athens on Thursday—four weeks after they abruptly left—disappointed at the lack of progress made in implementing the promised reforms.

The auditors spent the weekend trying to obtain the most up-to-date picture of Greece’s finances and forecasts, after protests, including staff occupations of ministries, meant a slow resumption of negotiations last week.

Eurozone finance ministers are due to meet in Luxembourg on Monday to discuss the Greek debt crisis and reach an agreement on the payment of the €8-billion bailout tranche, which the IMF has blocked for a month.

Pre-plans expected
Greece will on Sunday unveil plans to trim its bulging civil service and meet one of its creditors’ key demands ahead of the eurozone meeting.

Divided eurozone ministers will seek to avert a Greek default which could send stock markets into a panic, deal an unprecedented blow to the European currency and bring the world back to the brink of a fresh financial crisis.

On Sunday afternoon, Greek Prime Minister George Papandreou was to chair an emergency cabinet meeting to finalise the details of a scheme aimed at shrinking the public sector.

Following consultations with EU and IMF auditors, the government now seems to have locked on a scheme to place 30 000 civil servants temporarily in a “labour reserve”.

Finance Minister Evangelos Venizelos said the government had developed the scheme effectively laying off state workers with “transparent and objective” criteria.

“It creates the lowest possible social cost and places on a ‘reserve’ those who in comparison can more likely cope with the difficulties of this new situation,” Venizelos said in an interview with the Sunday edition of newspaper To Vima.

Greek civil servants’ jobs are protected by the constitution, hence the controversial idea of a “labour reserve”—where those close to retirement could be placed on a lower wage.

Antonis Samaras, the leader of Greece’s main opposition New Democracy party, complained that the government had rejected a more efficient labour reserve plan.

“With our proposal the deficit will be reduced by €850-million the first year and four billion the fifth. According to the government’s proposal the deficit will decrease by €614-million the first year and three billion the fifth,” he wrote in the same newspaper.

D-Day
EU economic and monetary affairs commissioner Olli Rehn will give ministers the inside track in Luxembourg on Monday on what the Washington-based IMF wants to do, as looming recession risks turning Greece’s crisis into global catastrophe.

There remains the spectre of imminent default as anticipated by markets treating Greek sovereign bonds as monopoly bets.

Their expectation is that the European Central Bank (ECB), soon under new Italian management, will step back in.

Athens is labouring under a crushing €350-billion or more of debts, with its stripped-bare economy already on its knees, and the government says it needs the loans to pay salary and other bills this month.

A top official from Chancellor Angela Merkel’s Bavarian sister party suggested Sunday that Greece ought to solve its economic problems outside the eurozone, as Europe’s paymaster remained divided over the Greek crisis.

“I think it is a solution, if you want to bring Greece back to stable competitiveness, that they do so outside the eurozone,” Alexander Dobrindt, general secretary of the CSU party, told German radio.

He added that if Greece failed to convince an international team of auditors of its reform efforts to secure more aid, then the EU’s rescue fund, the EFSF, “should also have the right to organise the exit.”

The United States and other major economies are showing growing signs of concern that Europe is too divided to solve the Greek problem or deal with problems in the much bigger Italian economy and adequately re-capitalise banks that lose heavily in the event of default.

France is one of the most heavily exposed.

Outside Europe, the fear is that a ricochet effect could charge through global financial markets already on a downer as data increasingly points towards renewed recession.

Many want the €440-billion European Financial Stability Facility’s legal status changed to that of a bank so it could “leverage” much more firepower.

In other words, based on different rules governing how much is needed in terms of reserves, borrow vast sums to ensure worries over bigger eurozone nations evaporate.—AFP

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