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Greece likely to get bailout loans after review
Debt inspectors complete review, say payout of next bailout tranche likely in early November
By The Associated Press

ATHENS, Greece (AP) ' Greece is likely to receive the next batch of its bailout loans in early November, international debt inspectors said Tuesday, if the eurozone and IMF approve the conclusions of the financial review they have completed.

The inspectors, however, said Greece's deficit targets for 2011 were "no longer within reach," and that while new austerity measures for 2012 were adequate, more was needed for the years 2013-14.

The report by the officials from the International Monetary Fund, European Commission and European Central Bank, collectively known as the troika, potentially averts a bankruptcy looming over Greece.

But their call for new measures reinforces the view that Europe's strategy in getting Athens out of its debt hole is not working as hoped and that an alternative approach is needed.

"Greece has missed the bus, yet again," said Vangelis Agapitos, an independent economist in Athens. The "troika is fulfilling its obligations and Greece, for one more time, is missing its targets on privatizations, on cutting the deficit, on doing the steps necessary to bring the economy into a competitive and efficient mode."

Greece has been dependent since May last year on a euro110 billion ($150 billion) bailout package from other eurozone countries and the IMF. Without the next euro8 billion loan installment, the country has said it would run out of funds to pay salaries and pensions in mid-November.

To qualify for the funds, the government has pledged reforms aiming to slash its deficit and overhaul the economy. But it has frequently missed its targets, forcing it to pile on ever more austerity measures such as increased taxes and cuts to public sector salaries and pensions.

That has led to frequent strikes and protests ' on Tuesday, protesters took over several state buildings, including the Interior Ministry and the country's General Accounting Office. A strike by municipal workers has left piles of garbage on Athens' streets, while motorists formed long lines at gas stations after workers at a main refinery went on strike.

Outside parliament, as lawmakers began debating legislation for the latest austerity reforms, hundreds of local government workers blocked traffic at the main entrance, blowing whistles and chanting anti-government slogans.

"We believe that voting this bill bolster the country ... We have 10 days in front of us for the bill to be passed," Venizelos said during a financial committee meeting in the legislature.

The troika suspended its review in early September due to delays, returning to Athens about two weeks ago to complete their inspection. Their findings must now be approved by the other eurozone countries and the board of the IMF before Greece can receive the next loan installment. The troika said that would be "most likely in early November."

The acrimony accompanying the mission, and the fact that more corrections of Greece's austerity program are needed even after Athens passed new measures this summer ' underline that the eurozone may be realizing that its handling of the country's problems need to be reassessed.

The payout of the next loan installment is also tied to a second rescue package for Greece agreed on July 21, which will likely see steep losses for banks holding the country's bonds to make the its massive debts sustainable.

Eurozone leaders hope to agree on a comprehensive crisis strategy at their summit on Oct. 23, which will see a new funding package for Greece, a plan to make Europe's banks fit to sustain losses on bonds and a boost in the currency union's bailout fund, so it can stop the crisis from spreading to larger economies. The president of the EU's executive arm says he will unveil proposals on how to make European banks fit enough to sustain the worsening debt crisis on Wednesday.

The troika said Greek authorities "continue to make important progress, notably with regard to fiscal consolidation," but more was needed.

"To ensure a further reduction in the deficit in a socially acceptable manner and to set the stage for a recovery to take hold, it is essential that the authorities put more emphasis on structural reforms in the public sector and the economy more broadly," it said in a joint statement.

Mired in a deeper-than-expected recession, Greece's economy is now only expected to recover from 2013 onwards, the debt inspectors noted.

"There is no evidence yet of improvement in investor sentiment and the related increase in investments, in part because the reform momentum has not gained the critical mass necessary to begin transforming the investment climate," it said, though it noted exports were rebounding.

The inspectors said the government had achieved a "major reduction" in the deficit despite the recession. However, it said, "the achievement of the fiscal target for 2011 is no longer within reach, partly because of a further drop in GDP, but also because of slippages in the implementation of some of the agreed measures."

Additional measures the government recently announced ' which include extra taxes and suspending about 30,000 civil servants on partial pay ' "should be sufficient to bring the fiscal program back on track and ensure that the deficit target of euro14.9 billion will be met."

The troika said delays in a privatization plan combined with worse market conditions would lead to significantly lower-than-expected revenue this year, but that the government was still committed to raising euro35 billion through privatizations by the end of 2014.


Gabriele Steinhauser in Brussels and Derek Gatopoulos and Theodora Tongas in Athens contributed to this report.

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