05 November 2013

WSJ: Greek officials, budget inspectors discuss aid conditions

International budget inspectors have begun meetings with Greek officials, in a second round of talks aimed at bridging a contentious divide over what more Athens needs to do to secure its next tranche of aid.

The review comes amid heightened political tensions in Greece. Labour unions have called a nationwide general strike to protest further austerity measures, while the two parties in the coalition government are divided over a new property tax.

Representatives from the the troika met with Finance Minister Yannis Stournaras for more than two hours on Tuesday, their first session since the end of September. At stake is Greece's next slice of aid, worth €1 billion ($1.35 billion).

"It was a good first meeting", said a senior Greek finance ministry official who took part. "One of the things we discussed was the 2014 budget draft and a series of initiatives such as tax compliance and tax administration." "The troika", he continued, "will collect information through the week on where we stand, and there will be another meeting with them, probably on Friday."

A big sticking point in discussions between the two sides is whether Greece needs to adopt more austerity measures to close a projected fiscal gap next year. Greece must achieve a primary budget surplus—the surplus before counting interest payments on debt—equal to 1.5 per cent of gross domestic product in 2014, with this rising in succeeding years. For this year, Greece is on track to report a small primary budget surplus—its first in decades. Despite this, the international inspectors say that the country must take further measures to cover a projected €2 billion to €2.5 billion shortfall in meeting the 1.5 per cent of GDP target next year. The Greek government, however, has refused any further across-the-board budget cuts or tax hikes, and says it is only about €500 million short of next year's target.

Further austerity measures to make up for projected shortfalls in 2015 and 2016 are also expected to be discussed. According to the IMF, Greece faces an additional financing shortfall of about €11 billion between mid-July next year, when a eurozone aid package to Greece expires, and early 2016, when IMF aid to the country runs out. Roughly half of that financing gap is because eurozone central banks went back on a commitment to support Greece by rolling over its government bonds.

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See also: Troika calls for streamlined EAS, lower social security contributions for employers © Kathimerini

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