Brussels, 31/10/2012 (Agence Europe) - The head of Eurogroup, Jean-Claude Juncker, said after a special videoconference meeting of Eurogroup (see EUROPE 10721) on Wednesday 31 October: “Eurogroup took note of the progress made towards a full staff-level agreement between Greece and the Troika on updated programme conditionality, including ambitious and wide-ranging measures in the areas of fiscal consolidation, structural reforms, privatisation and financial sector stabilisation. We called on the Greek authorities to solve remaining issues so as to swiftly finalise the negotiations with the Troika institutions.” (The troika is made up of the European Commission, the European Central Bank, and the International Monetary Fund). The eurozone wants Greece to pull out the stops ahead of the Eurogroup meeting of 12 November on the new €13.5 billion savings package for 2013 and 2014 as a precondition for the disbursement of a new instalment of aid, adding: “Eurogroup expects to further discuss the Greek adjustment programme at its next regular meeting on 12 November on the basis of the relevant programme documentation and seek to conclude on the programme, subject to the completion of prior actions by the Greek authorities and of national procedures in member states, in line with the established practice” (see EUROPE 10706). He did not mention the possibility of another special meeting, on 8 November, to discuss this.
Quizzed on German radio (Deustchland Radio Kultur), Thomas Wieser, who chairs the EU Council of Ministers' working group on the euro, said on Wednesday that it would be possible to give Greece two more years to meet its deficit reduction targets, as requested by the Greek goverment. He said this would require more liquidity but no more cash. He expressly ruled out any writedown of Greek bonds owned by public lenders.
If the new savings package gets the go-ahead from the Greek parliament by 12 November and the troika's final report says the Greek debt repayment plans are feasible, then ministers could release the next aid instalment of more than €30 billion.
On Wednesday morning, the European Commission contradicted comments by Greek prime minister Antonis Samaras on Tuesday that agreement had been reached (other parties in the coalition government disagreed, see EUROPE 10721). Simon O'Connor, a spokesman for Euro Commissioner Olli Rehn, said that Greece and the troika were still working to reduce the number of outstanding issues and he was confident that agreement would soon be reached at technical level. Getting the €13.5 billion savings package through is a test of the solidity of the Greek government.
Problems worse than expected. According to the draft budget for 2013 lodged with parliament on Wednesday morning by finance minister Yannis Stournaras, as demanded by the troika, the Greek government will agree to €9.4 billion of savings for next year, rather than €7.8 billion (see EUROPE 10709). This draft budget makes sharply more pessimistic forecasts than the version unveiled at the beginning of the month (see EUROPE 10700).
The Greek finance ministry is now forecasting that GDP will shrink by 4.5% in 2013 (compared with 3.8% in the previous draft), following shrinkage of 6.5% in 2012. The country's public debt will be bigger than expected next year, reaching 189.1% of GDP, nearly 10% higher than initially announced by the ministry (179.3%). The budget deficit is expected now to rise to 5.2% of GDP in 2013. Sources at the Greek finance ministry say they expect the 2013 budget to be voted through ahead of the 12 November deadline.
In Berlin on Wednesday evening, the German chancellor, Angela Merkel, and the director general of the International Monetary Fund, Christine Lagarde, discussed the situation in Greece. (EL and MB/transl.fl)