Greek creditor talks to continue Tuesday

By Derek Gatopoulos

Associated Press

Published: Monday, Sept. 19 2011 12:00 a.m. MDT

IMF representative Bob Traa speaks during a conference in Athens, Monday, Sept. 19, 2011. Greece's finance minister promised Monday to stick with his plan for the country to post a primary surplus in 2012, hours before he was to hold an emergency teleconference with debt inspectors.

Petros Giannakouris, Associated Press

ATHENS, Greece — Greek authorities and international officials were due for more talks Tuesday on whether debt inspectors will return to Athens, a key issue that could affect whether the nation gets more bailout funds or defaults on its debts.

As global stocks fell on fears of a Greek default, Athens on Monday struggled to convince officials from the European Commission, the European Central Bank and the International Monetary Fund that the country could meet strict budget targets promised in return for the international cash lifeline.

After a Monday conference call involving Greece's finance minister ended without a decision on the inspectors, European Commission spokesman Amadeu Altafaj Tardio said another call was set for Tuesday evening.

"In the meantime, technical discussions are ongoing in Athens," he said.

A finance ministry statement said Monday's two-and-a-half hour discussion was "productive and substantive."

Following delays by the Socialist government to deliver on promised reforms, Greece's European eurozone partners and international creditors are stepping up pressure on Athens at the start of a crucial week in Europe's nearly two-year debt crisis.

When it became obvious earlier this month that there was a more than €2 billion ($2.75 billion) shortfall in the 2011 budget, creditors threatened to withhold the sixth installment of the rescue package agreed to in May 2010.

They also suspended a review of Greece's deficit-cutting and reform targets by senior inspectors from the IMF, the ECB and the Commission — collectively known as the "troika" — although a technical team remains in Athens.

That review must be completed before the troika can issue a recommendation on whether Athens should receive the €8 billion ($11 billion) sixth installment, without which the country will go bankrupt by mid-October.

Despite pledges by Greek Finance Minister Evangelos Venizelos, fears that Athens will default on its mountain of debt roiled markets Monday. Stocks were hammered in the United States — where the Dow Jones industrial average was down nearly 1 percent after a late-day rally — and Asia as well as Europe.

Athens is struggling with a deepening recession that is eating away at the impact of its austerity measures while also causing unemployment to spike and public anger to grow.

Before the discussions, Venizelos said the government still seeks to generate €3 billion ($4.1 billion) more revenue next year than it spends, before counting the cost of interest on existing debts.

Greece's economy is expected to contract about 5.5 percent this year and a further 2.5 percent in 2012, according to new government and IMF estimates.

"The country cannot go forward without the true implementation of major structural reforms," Venizelos said at a conference south of Athens, adding that achieving the 2012 target was vital.

The government still must live up to its commitment to lower the 2011 budget deficit goal to 7.6 percent of gross domestic product.

The Greek government has hurriedly announced an extra two-year property tax — payable through electricity bills to ensure its collection — to compensate for the shortfall.

But the news was greeted with a fierce outcry from a public already reeling from salary cuts and the recession. State electricity company trade unionists also threatened to refuse to collect the taxes.

Yiannis Panagopoulos, head of Greece's largest trade union, GSEE, said further revenue-boosting levies would be "unfair and imbalanced."

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