Greece drops plan to sweeten bailout terms

July 6, 2012 at 3:00 AM
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ATHENS, Greece, July 6 (UPI) -- Greece has dropped plans to ask for easier terms for its second bailout, after being warned the plea would be turned down, the country's finance minister said.

The country is "off-track" in carrying out structural changes demanded by lenders -- the European Commission, the International Monetary Fund and the European Central Bank -- Yannis Stournaras told reporters after a 50-minute meeting in Athens with the lenders, known as the troika.

"We can't ask for anything from our creditors before we get it back on course," said Stournaras, who was sworn in hours before the meeting.

"There is light at the end of the tunnel but it is a long tunnel," he separately told the Financial Times.

Stournaras, an economist who helped parley Greece's entry into the eurozone, is under intense public pressure to renegotiate austere bailout terms with the visiting delegation.

The government's three coalition partners -- the conservatives and two left-of-center parties -- all vowed during recent election campaigns to press for a one- or two-year extension of the tough bailout demands to ease the pain of 4 1/2 years of recession, with unemployment now topping 21 percent.

Evangelos Venizelos, president of Greece's Panhellenic Socialist Movement, or PASOK party, and until March Greece's finance minister, said Thursday a one- or two-year extension was not "realistic."

Greece's bailout plan needed to run until 2017, he said.

A two-year extension would cost Greece's eurozone peers and the IMF -- which are paying for the country's $215 billion bailout -- an additional $20 billion to $25 billion, the Journal said.

Greece needs another $40 billion installment in the next few weeks to avoid running out of money. Troika officials are in Athens to decide whether to grant the disbursement.

The decision is supposed to be based on whether Greece has held to the bailout terms.

IMF Managing Director Christine Lagarde told CNBC Wednesday, before flying to Athens, she had no interest in adjusting Greece's bailout terms.

"I'm not in a negotiations or renegotiations mood at all. We are in a fact-finding mood," she told the network. "I'm sure they will have excellent numbers to show in various directions."

What the troika found was that Greece, despite earlier promises, failed to shut down non-essential state agencies, privatize state assets, lay off public-sector workers, recapitalize banks, overhaul its tax code and identify about $14.5 billion in spending cuts over two years, The Wall Street Journal reported.

It also missed a deadline to crack down on tax evaders, whose rampant dodging is estimated to equal about 5 percent of Greece's gross domestic product, the Financial Times said.

Greece's overhauls were derailed in part by elections in May and June that put the country into a political crisis and policy paralysis, the Journal said.

Politicians have resisted reducing the size of the public sector and, if necessary, laying off thousands of public workers.

New Greek Prime Minister Antonis Samaras did not mention any extension of the bailout demands during Thursday's troika meeting, aides told the Financial Times.

"The prime minister stressed his commitment to accelerating structural reforms, especially privatization, in order to turn the economy around and start creating jobs," one person familiar with the discussions told the newspaper.

"It went well -- there was a good atmosphere," another aide said.

An IMF official said, "We don't have any comment on the talks at this point."

Stournaras was to present his plans for the Greek economy to Parliament Friday.

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