Greece set for fresh debt talks

Greece set for fresh debt talks

The Greek economy slumped in the last quarter of 2016. Source: Pixabay

Greece and its creditors are intensifying efforts to complete a stalled review of the nation’s bailout that would unlock much-needed aid before more than €6 billion in obligations are due in July.

As thousands of farmers protested in Athens over rising costs and biting cutbacks, the Hellenic statistical authority stated that GDP fell by 0.4 per cent in the last quarter of 2016.

After growth of 0.9 per cent in the previous quarter the fall was steep and unanticipated. Just on Monday the European Commission had said the eurozone’s weakest member was on course to achieve a surplus on its budget of 2.3 per cent after exceeding its 2016 fiscal targets “significantly”.

Prime Minister Alexis Tsipras’ left-wing coalition said it would not consent to further cuts beyond those the government had already agreed under its third, EU-led bailout programme.

Digital policy minister Nikos Pappas, a close Tsipras’ ally, announced on state-run television that ongoing differences between the EU and International Monetary Fund over how to stabilise the economy were to blame for the failure to agree a compliance review that was blocking a deal.

“The negotiations should have ended. Greece has done everything that it was asked to do,” he said.

But EU Commissioner for Economic Affairs Pierre Moscovici will Tsipras and Finance Minister Euclid Tsakalotos in Athens to try to reconcile differences over what reforms are needed to stabilise the economy. EU monitors had wanted to reach a deal by February 20 when eurozone finance ministers meet in Brussels.

Bailout creditors are demanding that Athens pass legislation that would trigger deeper budget cuts if fiscal targets are missed.

“It’s crucial that all partners now live up to their commitments so that an overall policy package can be reached as soon as possible,” European Commission Vice President Valdis Dombrovskis told the European Parliament. “There is no room for complacency.”

Greece’s auditors, the European Commission, European Central Bank, European Stability Mechanism and International Monetary Fund, have proposed fiscal cuts equal to 2 per cent of GDP, including a lower tax-free threshold and pension reforms, Bloomberg reported. In return, Athens would be able to reduce some taxes or social contributions if there was fiscal over-performance.

The Greek authorities deny that such a deal is being debated.

The IMF has argued that extra measures worth 2 per cent of GDP would have to be enforced if Greece was to achieve a high post-programme primary surplus of more than 1.5 per cent.

“There is no such proposal,” governmental spokesman Dimitris Tzanakopoulos told the media in Athens. “We are negotiating an agreement that doesn’t contain a single euro of austerity measures.”

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