14 March 2013

FT: Greece and lenders fall out over firings

It was only the second time in almost three years of regular bailout reviews of Greek progress on economic reform that the troika had left Athens without agreeing specific measures with the government.

A dispute over the sacking of civil servants has stalled talks between Greece and the “troika” of international lenders, delaying disbursement of €2.8 billion in bailout aid due this month, amid fears the country’s bailout programme is already veering off track.

Antonis Samaris, the Greek prime minister, did not directly address the stand-off. But he called on his fellow leaders to find new measures to boost employment across the EU. “Growth is the number-one European problem today,” Mr Samaras said.

His remarks were part of growing calls from southern eurozone leaders for more action to pull the currency bloc out of a deepening recession. Although a debate over the austerity-led crisis response was not formally on the summit’s agenda, several prime ministers said they would raise the issue, which has moved back into the spotlight since last month’s Italian elections.

In Greece, troika officials have rejected requests by Mr Samaras to modify austerity measures because of deepening social distress.

The governing coalition has pledged to avoid compulsory lay-offs in achieving a target of 25,000 civil service job cuts by 2014. But Greek officials failed to provide sufficient details of proposals to sack 7,000 public sector workers found guilty of misdemeanours, transfer less-skilled workers to a “mobility reserve” and accelerate retirements this year.

With social security contributions shrinking because of record unemployment and increased delinquency by employers, the state pension funds’ deficit could hit €500m this year and knock the budget off course.

Restructuring of the health sector is running behind schedule after another year of heavy spending overruns and delays in closing regional hospitals under a cost-cutting plan agreed with the troika.

Greece’s sixth year of recession may be deeper than forecast, with the central bank predicting the economy will shrink more than 5 per cent compared with the troika’s projection of 4.5 per cent. Some Athens-based analysts forecast that a return to growth may be delayed until the second half of 2014.

Full article (FT subscription requited)

© Financial Times