03 July 2013

Reuters: Greece says to miss public sector reform target

Greece will not meet targets on reforming its public sector by an end-of-the-week deadline set by its international lenders, Finance Ministry officials said, ahead of a meeting to decide on unlocking a further €8.1 billion in aid.

But the officials said Athens expected to reach agreement with its foreign lenders on all other issues before Monday's meeting of eurozone finance ministers. The EU and IMF are unhappy with the progress Greece has made in reforming its bloated public sector. If they are not persuaded that Greece is on track to meet its reform goals, the lenders may freeze emergency aid for three months.

Athens needs to conclude talks with its lenders by the middle of the month to ensure it receives the latest aid tranche, which it needs to redeem about €2.2 billion of bonds in August. Public sector layoffs are an incendiary issue in Greece, which is struggling through a sixth year of recession, record high unemployment and sinking living standards. Athens has missed a June deadline to put 12,500 state workers into a "mobility scheme", under which they are transferred or laid off within a year, and officials said it would not be able to strike a deal on the issue.

To press Athens to deliver on reforms without creating a full-blown crisis, its lenders might refuse to pay the full sum in one go and break it up into monthly payments instead.

Delays in pushing ahead with the hugely unpopular reforms have become a thorny issue in talks with lenders, who returned on Monday after a two-week break during which Prime Minister Antonis Samaras lost an ally in his ruling coalition and reshuffled his cabinet.

Kyriakos Mitsotakis, the newly-appointed administrative reform minister tasked with making the civil service smaller and more efficient, said he needed several months to get the scheme right. He proposed compensating for the shortfall by speeding up firings of civil servants who have been found to have broken the law or those who were hired under false credentials.

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© Reuters