Greece: Bailout extension for Greece being discussed
October 29, 2012
The Greek coalition government failed to reach an agreement regarding the labour reform demanded by the IMF-ECB-EC lenders, as one of the members of the coalition, the Democratic Left party, announced that it would vote against the amendment. That said, the Democratic Left party has only 16 deputies in the 300-seat parliament, and the coalition which holds a total of 176 seats could still approve the bill without its support. Prime Minister Antonis Samaras is seeking to reach a deal among coalition partners before the conference call of Eurozone finance ministers scheduled for 31 October, in order to unlock the release of the next EUR 31 billon tranche of international aid. On 22 October, Eurostat revised Greece's fiscal deficit and public debt data for 2011 to 9.4% of GDP (previously: 9.1% of GDP) and 171% of GDP (previously: 161% of GDP) respectively. Against this backdrop, some members of the Troika have started to openly discuss the fact that Greece is off track and that public debt will exceed the targeted 120% of GDP for 2020. Furthermore, rumours are mounting that the country's European peers are willing to grant Greece two additional years to meet its budget targets. The ECB appears divided over the issue, as a two-year extension would require additional financial aid in order to plug the fiscal gap (estimated at around EUR 30 billion). The current discussions do not include a consensus on how these funds might be raised. Meanwhile, some details of the EUR 13.5 billion budget adjustment agreed on by the end of September have begun to emerge. According to local media, the agreement includes a cut of 25,000 public sector jobs, an increase in the retirement age to 67 years and the elimination of various tax exemptions. Moreover, the government is expected to raise some additional taxes and to maintain the emergency "solidarity" levy until 2018. Officials from the German Finance Ministry suggested that Greece should hire foreign experts to help the country collect taxes, fight corruption, improve statistical data and privatise government assets.