VIA Dow zones newswire
ATHENS -- Talks between Greece and a visiting troika of international
inspectors were suspended Friday amid a dispute over the country's ability to
meet its deficit targets, raising fresh doubts over Greece's continued access to
bailout funds.
The talks, which began earlier this week, were previously expected to
conclude by Sept. 5, but were suspended after a meeting between the inspectors
and Greek finance ministry officials ended abruptly early Friday morning.
At stake is whether Greece will have to take additional fiscal measures this
year to secure the next, EUR8 billion disbursement of official aid, as promised
under a EUR110 billion bailout the country received last year from its eurozone
partners and the International Monetary Fund.
According to a Greek government official, the delegation of inspectors--from
the IMF, the European Union, and the European Central Bank--is now expected to
return in about 10 days after the Greek government has prepared a draft outline
of its 2012 budget.
"They will come back in 10 days when we have a draft of the 2012 budget
ready," the official said, adding that there had been differences in opinion
over how Greece would address a yawning budget gap that is wider than expected.
"When they return, they will take a look at the draft budget and we'll see
how we can resolve the issue," the official said.
Greek Finance Minister Evangelos Venizelos has called a press conference at
0900 GMT, where he is expected to address the current state of the talks. Troika
officials could not be immediately reached for comment.
At issue were diverging views over Greece's economic outlook this year and
next, and whether the government would have to take additional measures to meet
its deficit targets in 2011 and 2012.
Greece's government now says the economy will shrink between 4.5% and 5.3%
this year, against a previously forecast 3.9% contraction, and blame the
deeper-than-expected recession on the country's inability to meet its 2011
targets.
Government officials say this year's budget deficit could be around 8.1% to
8.3% gross domestic product--compared with an official 7.6% target--although
they do not rule out an even worse outcome for the budget gap.
According to officials, the troika says the deficit will reach 8.8% this year
and is asking Greece to take additional spending cuts to meet its targets. But
Greece's finance minister, Evangelos Venizelos, has publicly stated that no
further measures will be necessary if a package of austerity programs passed by
the Greek parliament in June are fully implemented.
"The Greek side insisted the missed targets are the result of the recession.
The troika said recession played a part, but Greece basically didn't keep up
with its commitments so more measures will be needed to make up for the lost
ground," said a person with direct knowledge of the talks.
"There is a clear disagreement that can't be bridged today," the person
added. "The troika told Venizelos that they will leave Athens late yesterday. We
have a clear disagreement on what caused the latest slip-up and what should be
done about it."
News that the talks had been suspended sent Athens shares sharply lower with
the stock exchange general index falling 3.6% to 895.28--below the
psychologically important 900 point level--and with banking stocks tumbling 6.5%
on average.
The extra yield demanded by investors to buy Greek bonds also climbed higher
with the 10-year yield spread between Greek and German bonds widening by ten
basis points to 1544 basis points.
Analyst said that the talks reflect a diverging agenda between the Greek
government and the troika.
"The troika is clearly dissatisfied with the implementation of economic
policy by Greece," said Anthony Livanios, an independent political analyst.
"On the other hand, the Greek government wants to show that it is pushing
troika in order to satisfy demands from labour unions and other pressure groups.
Both sides have strong reasons for a break in talks to take place."
No comments:
Post a Comment