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Greek creditors recommend loan payout

By Juergen Baetz

Associated Press

Published: Thursday, Oct. 20 2011 5:30 a.m. MDT

Protesters try to avoid the effects of tear gas fired by police forces to disperse the crowds in front of the Greek parliament in central Athens, Wednesday, Oct. 19, 2011. Greek anger over new austerity measures and layoffs erupted into violence Wednesday, as demonstrators hurled chunks of marble and gasoline bombs and riot police responded with tear gas and stun grenades that echoed across Athens' main square.

Petros Giannakouris, Associated Press

BERLIN — Greece will get its next batch of international bailout loans but its second rescue package may not be enough to save it from bankruptcy, according to a draft of a debt inspectors' report obtained Thursday by The Associated Press.

Although the inspectors said Greece has missed its deficit-cutting targets and that the pace of its reforms is insufficient, they said Athens will get €8 billion ($11 billion) of bailout loans so the country can avoid bankruptcy next month.

The inspectors from the European Commission, the European Central Bank and the International Monetary Fund also said Greece's debt dynamics remain "extremely worrying."

Greece has been relying on a €110 billion ($152 billion) package of rescue loans since May last year.

They warn in their report, however, that a second bailout for the country tentatively agreed to on July 21 does not make its massive debts sustainable.

Though it reduced Greece's immediate financing needs, "this could not suffice for the debt dynamics to be described as sustainable" if implementation of reforms by Greece remains weak.

It adds that Greece's overall "debt sustainability has effectively deteriorated, given delays in the recovery, in fiscal consolidation and in the privatization plan, as well as the perspective of bank recapitalizations."

The report, sent to German lawmakers Thursday, said the reform efforts by the Greek government are "very large", but the criteria as off the end of September "appear to have been failed by a small margin."

"The implementation of the growth-enhancing structural agenda continues, but the pace of reform has so far been insufficient," the report said.

Greece, meanwhile, was paralyzed by the second day of a general strike against the harsh austerity measures already implemented.

In Athens on Thursday, protesters gathered by the tens of thousands outside the Greek parliament, ahead of a vote on intensely unpopular new austerity measures.

Police said at least 50,000 people had flooded the square on the second day of a general strike that paralyzed the country, and more were arriving. Earlier, a communist party-backed union abandoned a bid to prevent lawmakers from entering parliament after riot police shut down main access roads.

Though largely peaceful, Wednesday's massive protests in Athens was marred by attacks on police and public property.

The austerity bill won initial approval in a first vote Wednesday night, and deputies are now to vote on the details, which suspending 30,000 public servants on reduced pay and suspending collective labor contracts.

Creditors have demanded the measures before they give Greece more funds from a €110 billion ($152 billion) package of bailout loans from other eurozone countries and the International Monetary Fund. Greece says it will run out of money in mid-November without the next €8 billion ($11 billion) installment.

Gabriele Steinhauser contributed to this report from Brussels

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