03 October 2012

WSJ: Greece, Troika remain apart on cuts

Greece's efforts to clinch a deal with its international creditors on a package of cuts by the end of this week are under threat, with the government saying that a "fairly big" gap still separates the country from its lenders, while a fresh dispute has emerged over proposed labour market changes.

Greek Finance Minister Yannis Stournaras said the two parties are trying to find a compromise over the right austerity mix ahead of next week's eurozone finance ministers' meeting in Luxembourg. "We are trying to achieve the best possible result so that the next aid tranche is paid faster", Mr Stournaras said  after a meeting with Prime Minister Antonis Samaras.

The latest dispute—over cuts to workers' benefits—comes just days after inspectors rejected billions of euros of planned spending cuts and tax measures, raising concerns in Athens that an agreement on the package won't be reached ahead of the eurozone meeting.

Athens was hoping that eurozone finance ministers would sign off on the measures at their meeting in Luxembourg on Monday, but that prospect looks now dim, making it less likely that new aid for the country will be approved at a eurozone summit later this month. Government officials now say that Europe might hold an extraordinary summit in November to approve the €31 billion aid instalment, most of which will go toward recapitalising the country's banks, under Greece's €173 billion bailout.

Representatives from the International Monetary Fund, the European Union and the European Central Bank, also known as the troika, asked Labour Minister Yannis Vroutsis at a meeting Tuesday to reduce the amount of compensation paid to sacked private-sector workers, a move that they argue will boost labour-market flexibility. Other demands include Greece dropping an automatic 9 per cent pay rise paid to employees after three years of employment.

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