IMF warns Greece to cut deeper as default threatens

IMF warns Greece to cut deeper as default threatens

Athens: The IMF gave Greece an ultimatum on Monday to introduce more budget austerity to win the release of rescue funds and escape bankruptcy early next month.

“Additional measures will be needed in order to reduce the budget deficit," the IMF representative to Greece, Bob Traa, warned at a symposium.

Greek finance minister Evangelos Venizelos admitted that the coming week would be “very difficult" for the eurozone as well as for Greece.

The IMF warning is a strong signal that auditors from the International Monetary Fund, European Union and European Central Bank are not ready to approve the next slice of funding under a first rescue for Greece.

The auditors left Greece unexpectedly part way through their work, and the resumption of contacts with top EU and IMF officials on the audit was being held by teleconference on Monday, and even that was delayed.

Greek ministers were then to meet on what Venizelos described as new “concrete" measures.

Greek media reports suggest that the country, already shell shocked and in recession after two years of constant crisis since the incoming Socialist government admitted that growth and debt figures were false, is about to be hit with more measures totalling about €4.0 billion.

A senior official source said on Sunday that the head of fiscal policy had told ministries of 15 conditions from the EU and IMF, including layoffs in public bodies, a freeze on pensions between now and 2015 and the closure of about 30 public organizations.

European stock markets again fell sharply in response to inconclusive weekend EU talks in Poland on the euro zone crisis and signs of economic slowdown in Europe and the United States.

There is widespread speculation on financial markets that Greece risks not only bankruptcy but also departure from the euro zone, a possibility strongly rejected by EU mainstays Germany and France.

Venizelos had warned at the EU finance ministers’ meeting of “truly dramatic" consequences potentially beyond the euro zone’s control if Athens fails to win approval for its next slice of rescue funding.

Last week, under acute pressure to make up a shortfall of €2.0 billion ($2.8 billion dollars) under its rescue regime, Greece announced new measures including a controversial property tax. Then on Sunday, after the talks in Poland and after a three-hour cabinet meeting, Venizelos said there would be a new round of austerity measures.

The country, which won a first EU-IMF rescue totalling €110 billion in May 2010, has missed financial and privatisation conditions.

Amid signs that some EU decision makers are losing patience, Greece is fighting at the last minute to win approval for the next slice of €8.0 billion from that rescue to meet debt repayments, pay pensions and keep hospitals and other public services running.

On July 21 this year, the EU and IMF admitted that in any case Greece would not be able to rise above its debt now exceeding €350 billion.

They announced a complex framework for private creditors to take big losses under a second rescue of €159 billion. But this is being held up by arguments within the euro zone about guarantees and even the feasibility of the bailout.

The second rescue was the main subject of the meeting in Poland, which decided however to delay a decision on releasing the slice of €8.0 billion from the first rescue until early in October. Greece has signalled that it has enough money to keep going until about the middle of next month.

Traa, speaking at a conference between the IMF and Greek business leader, said that Greece should launch urgent reforms of its tax administration and warned the government against constantly raising taxes.

Some top EU officials have warned that the euro zone crisis could wreck the European Union, the United States has warned that it poses a “catastrophic" risk to financial markets, and France said after the 21 July meeting that the way forward lay in a big step towards economic government of the European Union.