Finance minister reportedly lashed out at mission chiefs from EU, ECB and IMF as pressure builds over next repayments
Almost three years after Greece narrowly avoided bankruptcy with its first bailout from the EU and IMF, the country's relations with its international creditors have deteriorated as pressure over its next aid repayment intensifies.
The Greek prime minister, Antonis Samaras, was forced to step in on Sunday after negotiations with visiting inspectors who returned to Athens last week stalled. .
Indicative of the tensions, Athens' normally mild-mannered finance minister, Yiannis Stournaras, reportedly lashed out at mission chiefs from the EU, ECB and IMF during a heated exchange in his office on Thursday, telling them they could "take the keys" to the economy ministry if they continued to demand more austerity from a nation experiencing a sixth straight year of recession.
Emerging from the building, the economics professor uncharacteristically labelled the negotiations as "very difficult" and gave a taste of his own frustration. "The negotiations for the next loan tranches are still very difficult. I can assure you that things are not simple at all," he said.
After troika representatives abruptly cancelled a meeting with Stournaras late on Saturday, Samaras tried to smooth over the cracks. At stake are two slices of aid worth €8.8bn that have been put on hold because of the slow pace of structural reforms.
The first instalment, of €2.8bn, is contingent on the governing coalition agreeing to sack 25,000 civil servants by the end of the year and 150,000 by 2015. The demand has placed what is being described as "intolerable pressure" on Samaras's already fragile administration, with his two junior leftwing partners openly opposing the measure at a time when unemployment is nearing a record 30%.
Highlighting the discord, the administrative reform minister, Antonis Manitakis, in charge of streamlining the bloated public sector and aligned with the small Democratic Left party, threatened to resign – a move that would dramatically undermine the government's unity.
Other sticking points, according to well-placed sources, include the recapitalisation of Greek banks – and a possible merger between the National Bank of Greece and Eurobank – and a highly contentious property tax levied through electricity bills that the conservative-led coalition pledged to scrap when it assumed power last June.
Household incomes have fallen by as much as 50% since the debt crisis erupted in Athens more than three years ago. In an attempt to placate lenders and keep a restive population at bay, Samaras and his coalition partners proposed last week that the property levy be substantially reduced by broadening the tax base to include farmland and undeveloped real estate. Creditors, so far, have failed to react.
Greece faces two debt repayments, including €3.6bn in maturing treasury bills, this month and next. "Not reaching an agreement is not an option," said Pandelis Kapsis, a prominent political commentator and former government spokesman. "There may be a delay [in disbursement of rescue funds] but there is absolutely no way we can move ahead without an agreement," he told the Guardian.
Greece is likely to suffer from the turmoil in Cyprus, whose economy is expected to contract sharply following its own bailout agreement. But last week Samaras spoke for the first time of an economic recovery amid signs that fiscal consolidation was finally beginning to pay off.
"Even those who until recently had their doubts are today convinced that we can make it," he told an audience in Athens, insisting that with private sector hirings outpacing firings in March the country was at long last breaking the vicious cycle of recession.
The investment bank Morgan Stanley also predicted that Greece would achieve a primary surplus by the end of the year, saying it was now optimistic about the country.
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