Tuesday, July 2, 2013

Exclusive: Greece has three days to deliver or face consequences - EU officials

BRUSSELS/ATHENS | Tue Jul 2, 2013 6:04am EDT
(Reuters) - Greece has three days to reassure Europe and the International Monetary Fund it can deliver on conditions attached to its international bailout in order to receive the next tranche of aid, four euro zone officials said on Tuesday.

The lenders are unhappy with progress Greece has made towards reforming its public sector, a senior euro zone official involved in the negotiations said, while another said they might suspend an inspection visit they resumed on Monday.


Athens, which has about 2.2 billion euros of bonds to redeem in August, needs the talks to conclude successfully. If they fail, the International Monetary Fund might have to withdraw from the 240-billion-euro bailout to avoid violating its own rules, which require a borrower to be financed a year ahead.

That would heighten the risk that concerted efforts by policymakers over the past nine months to keep a lid on the euro zone crisis could unravel, at a time when tensions are rising in other countries on the region's periphery.

Portugal's Finance Minister Vitor Gaspar, the architect of its austerity drive under an EU/IMF bailout, resigned on Monday in a potential blow to his country's planned exit from an EU-IMF rescue program.

Political tension has also increased in Italy, where Prime Minister Enrico Letta called a government meeting after a coalition partner threatened to withdraw.

Athens and its creditors resumed talks on Monday to unlock 8.1 billion euros ($10.6 billion) of rescue loans, after a two-week break during which the government almost collapsed over redundancies at state broadcaster ERT.

"All agreed that Greece has to deliver (pledges) before the Eurogroup on Monday. That's why they must present again on Friday," a second source told Reuters.

Euro zone finance ministers are scheduled to meet on July 8 and discuss the situation in Greece, which is in its sixth year of recession and has seen unemployment surge to record highs.

MISSED DEADLINES

"It is a very difficult negotiation," a senior Greek official participating in the talks said. "We're moving fast to wrap up as many issues as possible a soon as possible."

But Greece's financial overseers - the IMF, the euro zone and the European Central Bank - were unlikely to be able to conclude their review in July and might need to suspend the visit and resume it in September, a senior euro zone official said on condition of anonymity.

Representatives of the EU-IMF-ECB "troika" have been holding serial meetings with government ministers in Athens, struggling to agree on a host of outstanding issues.

If talks are not concluded by the middle of month, Athens risked missing the installment, the Greek official added.

Athens has missed a June deadline to place 12,500 state workers into a "mobility scheme", under which they are transferred or dismissed within a year.

A shortfall of more than 1 billion euros has emerged at state-run health insurer EOPYY, meaning automatic spending cuts may have to be agreed to bring it back on an even keel.

Athens and the troika are also at odds over an unpopular property tax and a sales tax for restaurants.

The government plans to ask its creditors to lower this year's privatization target of 2.6 billion euros after failing to find a buyer for natural gas company DEPA.

The beleaguered government of Prime Minister Antonius Samaras has ruled out imposing any new austerity measures on a population that is going through the sixth year of recession.

Unemployment has hit a record 27 percent and Greeks have lost about a third of their disposable income at an average as a result of bailout-imposed austerity policies.


(Reporting by Reuters bureaus; Editing by John Stonestreet)

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