A proposal by the debt-stricken country to cut spending by €2bn has been rejected by 'troika' of creditors
Negotiations aimed at unlocking fresh rescue funds for Greece appeared to have hit deadlock on Monday after international lenders rejected €2bn in spending cuts proposed by the debt-stricken country.
Representatives of the European Union, the European Central Bank and the International Monetary Fund – the "troika" of creditors keeping Greece's insolvent economy afloat – flatly rejected key cost-cutting measures in a €13.5bn austerity package lenders are demanding in return for further aid.
After haggling over the cuts for most of its short period in office, Athens' fractious coalition was told the measures were "unworkable". The country remains mired in what will soon be a sixth year of recession.
"They have asked for clarifications and the talks are continuing," said the Greek finance minister, Yiannis Stournaras, looking down-beat as he emerged from a meeting with the officials.
Insiders said the lenders had objected to proposed cuts to the operational budgets of ministries as well as plans to lay off an estimated 15,000 civil servants by 2014. Instead, the visiting inspectors insisted the ruling coalition agree to further cuts in wages and pensions, a potentially explosive demand that Stournaras has repeatedly said will lead to the collapse of the Greek government.
The prime minister, Antonis Samaras, made a series of appeals to his EU counterparts.
Speculation of a growing rift among creditors over how to handle the "Greek problem" added to the fraught mood. With a vital €31.5bn cash instalment dependent on the austerity package finally being agreed, officials in Athens voiced fears of an "unforeseen accident" because of differences between the EU and IMF.
Last week the IMF chief, Christine Lagarde, said Greece's debt problem "will have to be addressed" in what was widely interpreted as renewed pressure to restructure its debt mountain. Lagarde was voicing the widely-held belief that six months after a huge writedown of Greek bonds by the private sector, Athens' debt pile remains unsustainable and can only be brought under control – and meet the targeted goal of reaching 120% of GDP by 2020 – if it is also restructured by the public sector.
But with the German chancellor, Angela Merkel, already hitting the campaign trail ahead of general elections next year, few in Berlin appear willing to accept further losses to salvage the Greek economy. "I think it would be fair to say [the differences] are affecting the talks," said one Greek official. "We are not just dealing with differences amongst ourselves [the three parties supporting Greece's governing coalition] but within the troika."
Meanwhile, unemployment in the eurozone hit a record 18.2 million, according to EU figures. The jobless rate across the euro area was 11.4% in August. July's reading was also been revised up to 11.4% from 11.3% previously. In the EU as a whole the jobless rate was 10.5%, with 25.4 million out of work. Youth unemployment is particularly bleak, at 22.8% in the eurozone, and 22.7% across the EU. The figures also showed
Greek youth unemployment hits 55.4%
This morning's youth unemployment stats also show that Greece was the eurozone country with the most young people out of work. According to Eurostat, 55.4% of adults under 25 are out of work in Greece, compared with 52.9% in Spain. In contrast, several northern European countries still have single-digit youth unemployment rates, with 8.1% in Germany, 9.4% in the Netherlands and 9.7% in Austria.
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