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live Angela Merkel will pay a surprise visit to Athens

05 October 2012 / 12:10:09  GRReporter
2660 reads

Victoria Mindova

German Chancellor Angela Merkel will visit Athens on Tuesday, 9 October, a spokesman of hers announced quoted by Bloomberg. The surprising decision came after the talks between the Greek government and the representatives of international lenders relating to the country’s financial stabilization programme over the next two years have stalled for more than a week. Greece will receive the next tranche of financial aid worth 31 billion euro if it reaches an agreement with the lenders.

Observers assess the surprise visit of Angela Merkel as a sure sign that Greece will not be on the agenda of the Eurogroup meeting on Monday. This means that the country will receive the next tranche in November at the earliest.

Angela Merkel ‘s last visit to Athens was in 2007, when she met with the Greek Prime Minister of the time Costas Karamanlis, with whom she was cultivating excellent contacts.

Meanwhile, intensive negotiations between the government and the representatives of the International Monetary Fund, the European Central Bank and the European Commission have been underway in Athens. The talks on Friday have been going on for more than three hours now and there is yet no information on whether there is progress.

A representative of the Ministry of Finance has said that the gray areas in the budget are being discussed. "Talks on the revenue, expenditure and privatization have been held so far," the same source told journalists in the corridors of the Ministry of Finance. He added that the negotiators have not yet specified the fiscal adjustment measures on which the government and the lenders disagree.

After the news that German Chancellor Angela Merkel will visit Athens, the Ministry of Finance has issued a statement. "The government and the supervisory Troika have been working 24 hours a day, so that Eurogrup ascertains the progress on Monday and the issue of Greece be on the agenda of the summit of European Union leaders." The main topic of the talks between finance ministers on Monday, 8 October will be Spain’s rescue. If Greece does not agree with the supervisory Troika, it will drop out of the programme of the meeting. Its next chance is the summit scheduled for 18 October when the final decision on the granting of the financial aid of 31.5 billion euro should be made.

However, the talks between the lenders and the government have stuck in the middle. The two sides will meet again on Saturday morning to once again tackle the issues of fiscal adjustment and budget management. Representatives of the Greek government have said that the issue of the banking sector recovery, which the delay of the next tranche has affected most severely, will be on the table of negotiations. Over 70% of the aid that Greece expects to receive in the coming weeks is planned for the recapitalization of banks. "There are still gaps in all the topics discussed," said a Greek government official involved in the talks with the lenders. The country will not receive any funds from the aid until reaching an agreement on the rescue programme.

A new problem has appeared in the course of negotiations and it is the level of recession in 2013. The Greek state has set in the draft budget for next year that the economy will shrink by another 3.8%. The International Monetary Fund estimates that the recession will reach 5%. The Ministry of Finance states that the estimates are based on the fiscal adjustment measures voted in March 2012 under the second Memorandum of financial support. They are worth 7.8 billion euro and are mainly from cuts in spending.

"When lenders want us to make additional cuts the recession will naturally deepen," a representative of the relevant ministry has explained the difference between the estimates of the Fund and those of the government. He has made it clear that not all measures have the same effect on the economic situation of the country. The ultimate goal of the entire programme remains zeroing the budget deficit. Permanent recession, however, makes it difficult to successfully implement the programme. The Ministry has pointed out that recession of 1% corresponds to 0.5% deepening of the budget deficit.

Tags: Angela MerkelGreek debt crisisInternational lendersFinancial aid trancheEurogroup
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