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Greece: Greece in talks to approve further budget cuts, troika remains in Athens

July 30, 2012

On 26 July, Prime Minister Antonis Samaras and Finance Minister Yannis Stournaras outlined additional budget cuts amounting to EUR 11.5 billion (USD 14 billion) for 2013 and 2014, in order to meet the terms of the second bailout package. The austerity measures include reductions in healthcare expenditure and pensions. The announcement coincided with the visit of the ECB-IMF-European Commission inspectors, who are assessing the implementation of the EUR 173 billion rescue package. The original adjustment program, which included privatizations as well as overhauling the tax system and cracking down on tax evasion, is off schedule after two elections this year that brought economic reform to a standstill. The government was expected to submit its completed budget plan to the troika for approval on 27 July, after the three groups that form the government coalition had signed it off. However, the parties failed to reach a consensus about the specific composition of the budget cuts and talks were postponed until 30 July. At the time of writing, the leaders of the ruling coalition have not yet reached an agreement and discussions will carry on in the coming days. Even with the additional measures, Greece is likely to push for a two-year extension of the deadline for meeting the fiscal targets set out in the bailout package, as the steeper-than-expected recession is eroding public sector revenue. Given the uncertain situation, troika officials unexpectedly decided to remain in Athens until the government has completed its budget plan. Originally, the troika was due to leave by the end of July and return to Greece in September to complete its final review.


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