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FINANCE > Auditors put more pressure on Athens

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International austerity inspectors pressed Greece’s prime minister on July 27 to implement new harsh cost-cutting reforms as the country faces the alternative of losing the rescue loans that are keeping the country afloat.

Antonis Samaras, whose conservative-led coalition came to power just over a month ago, is under intense pressure to stick to his predecessors’ austerity commitments - and find new areas to make cuts.

European Union, International Monetary Fund and European Central Bank officials - known as the troika - started a new scrutiny of Greece’s austerity program this week. If their report, expected in September, is damning, Athens could stop receiving its vital rescue loans and face a disorderly bankruptcy and exit from the euro, The Associated Press reported. 

The debt-crippled country has been surviving on international bailouts since May 2010. To secure them, it imposed deeply resented spending cuts, slashing incomes and salaries while hiking taxes.

Government spokesman Simos Kedikoglou said the inspectors, who represent Greece’s bailout creditors, briefed Samaras on “the initiatives that must be taken to ensure that the national program is brought back on track.”

 The hour-long meeting in Athens came a day after EU Commission President Jose Manuel Barroso exhorted Samaras to “deliver, deliver, deliver” on past Greek promises.

As part of its austerity efforts, Greece has achieved a remarkable reduction of its budget deficit from 15.8 percent in 2009 to 9.1 percent last year. However, the country is considerably off-target in other areas of reform.

Athens largely blames this on a deeper-than-anticipated recession, which could see its economic output fall by more than seven percent this year. That would bring the total economic contraction over the past five years to a crippling 20 percent - which Samaras has likened to the Great Depression in the U.S.

Samaras’ government must now secure approval from bailout creditors for a 14.5 billion euro ($17.78 billion) package of further cost-cutting and revenue-boosting measures in 2013 and 2014. Although no details have been made public, many of the savings are expected to come from new cuts in pensions and benefits.

Meanwhile, German Chancellor Angela Merkel and French President Francois Hollande pledged to do “everything to protect the eurozone” after telephone talks on July 27, Agence France-Presse reported.
 
“Germany and France are deeply committed to the integrity of the eurozone. They are committed to do everything to protect the eurozone,” the two leaders said a joint declaration released in Berlin.

 “In order to achieve this, the (eurozone) member states and European institutions, must live up to their respective responsibilities. Both countries stress the necessity to implement quickly the conclusions of the European Council” in late June.

Aides to Hollande said earlier that the leaders of the two biggest eurozone countries would have a telephone conversation around midday Friday on the economic crisis in Spain.

July/28/2012

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