New Greek austerity Budget under EU-IMF scrutiny

International officials are examining a new Greek Budget aimed at meeting tough austerity targets, a government source said yesterday, as analysts bet Athens would have to restructure its soaring debt.

Auditors from the European Union, the International Monetary Fund and the European Central Bank, which last year bailed out Greece from near-bankruptcy, are to meet the Finance Minister to discuss the blueprint.

“The talks are expected to focus on the three-year budget draft,” the source told AFP on condition of anonymity.

The visit was not part of the regular quarterly visit to check the country’s progress in return for funds out of last year’s €110-billion EU-IMF rescue loan, expected next month, the official added.

The new government plan aims to slash the country’s runaway deficit by a whopping nine points by 2015.

The 2012-2015 draft forecasts a deficit of one per cent by 2015.

Greece is under pressure to overhaul its economy with sweeping cuts in its chronically inefficient public sector. But a draconian austerity drive enforced for the past year has so far fallen short of the expected results.

Painful cuts on wages and pensions and a spending clampdown on state enterprises in 2010 succeeded in bringing down the budget deficit by more than five percentage points, substantial by any standards.

But the Finance Ministry has admitted that because of a deeper-than-expected recession, the 2010 deficit would be higher than the official estimate of 9.4 per cent.

EU data agency Eurostat will be releasing the final figure on April 26 but Greek media are already bracing for a deficit of more than 10 per cent.

The slippage is expected to bring a new round of austerity measures that have already drawn criticism from government lawmakers in Parliament.

The cuts already imposed have caused sometimes violent protests on the streets.

The economic pressures facing the country have caused divisions among the ruling socialists.

Vasso Papandreou, a senior figure inside the Socialist Party, warned that government policies were pushing the country into an ever-deeper hole in comments to Finance Minister George Papaconstantinou on Tuesday.

“This situation leads nowhere,” said Mr Papandreou, who heads the parliamentary committee that examines Greek economic policy.

“We are constantly taking measures and we are entering a vicious circle,” he added.

Mr Papandreou called for the government to seek a restructuring of its huge debt of over €300 billion.

Several analysts have already predicted that despite the government’s persistent denials, Greece will be forced to take this step before long.

“There is a 60 per cent chance that Greece will restructure its debt,” said Ciaran O’Hagan, head of rates research at Societe Generale in Paris.

A planned Greek borrowing sortie in 2011 has been postponed amid murderous rates: nearly 16 per cent for two-year loans and over 12 per cent for 10-year bonds.

Athens has also stopped issuing three or six month treasury bonds.

“They can no longer finance themselves at such rates,” said Christian Parisot, an economist at French investment company Aurel.