Greece Starts Work on €11.5 Billion Austerity Plan0

Greece Starts Work on €11.5 Billion Austerity Plan07




ATHENS--Greece on Thursday started a race to find 11.5 billion euros ($14.1 billion) in savings in a plan it hopes will pave the way for a softening of its bailout terms from international creditors after months of political uncertainty pushed back its reform program.

With the country's economy in its fifth year of recession and unemployment in April rising to a fresh record high, Greece ruled out introducing any additional belt tightening measures for this year and is moving ahead with implementing 3 billion euros of previously approved measures.

In a joint ministerial meeting involving the finance, defence and interior ministries, among others, senior government officials looked at how the country can achieve the savings before a troika of inspectors from the European Commission, the International Monetary Fund and the European Central Bank visit Athens on July 24.

"It was the first meeting to find the cutbacks from different ministries. Our intention is to finalize the measures by July 23," a senior government official said. "We are aiming for the best possible result."

The savings plan was scheduled to have been outlined by the end of June, according to commitments made in exchange for the country's second 173 billion bailout plan, but was set back after elections in May and June threw the country in political uncertainty.

Leaders from the three-party coalition government, which emerged from June 17 polls, are set to assess the cutbacks in a meeting next week after mid-level Greek government officials flesh out final details in the coming days.

The flurry of meetings come as Greece races against the clock: the government's cash reserves could run out by the middle of next month, and as revenue collections in the first half of the year show signs of falling short of target. The next 31 billion euro tranche of aid from Greece's euro-zone partners and the IMF--if it is approved--is not expected to be disbursed until September.

At the same time, the country is hoping to convince its euro-zone and IMF partners to extend the country's reforms program by two years until the end of 2016, arguing that a steeper-than-expected recession has made it impossible to stick to the original bailout deal. The extra two years are budgeted to cost Greece's creditors an additional 16 billion to 20 billion euros in funding, something they appear unwilling to consider.

Late Wednesday, the coalition government's three party heads--from the conservative New Democracy, socialist Pasok and small Democratic Left parties--decided that Greece would step up its efforts at renegotiating and easing the bailout terms. Although it remains undecided when and how Greece will press its case, and whether Athens will make them part and parcel of the upcoming troika talks.

In a bid to restore some of the country's tattered credibility with its international creditors, Greek Finance Minister Yiannis Stournaras said earlier this week that Greece will move ahead with implementing another 3 billion euros of measures for 2012, most of which had been finalized in March.

The previous Greek government had agreed to the belt tightening measures, but the plans were not implemented, leaving the current administration to deliver.

With the economy set to contract by between 6% to 7% this year, according to private sector economists, Greece is aiming to avoid the introduction of further cutbacks for the remainder of this year, that it fears will further weigh on economic activity.

"There is no talk of additional measures for this year," said the government official.

Figures released from the country's statistics office Thursday showed that Greek unemployment rate rose yet again in April to a fresh record high of 22.5% from 22.0% in the previous month. This compares with a jobless rate of 16.2% a year earlier.