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Victoria Mindova

The Greek government’s persistence not to cut the additional costs for medicines has created serious problems in the negotiations with international lenders, according to the latest information on the progress of talks. The drama that has been taking place between the Greek government and the supervisory mission of the International Monetary Fund, the European Commission and the European Central Bank for more than a month now has entered into a new stage. The lenders and the government still cannot agree on the final package of measures, which has forced the supervisors to set an ultimatum.

Shortly after 7:30 pm on Monday, information appeared from the circles of the Ministry of Health that the supervisors refuse to pay the full amount of the next aid tranche if the government does not introduce all the cuts associated with the list of free medicines.

Ten minutes later, a senior official from the Ministry of Health told reporters that the negotiations were proceeding excellently and all open topics would very soon be finalized. "We are the most powerful ministry, there is no problem with the lenders," the official from the relevant ministry told GRReporter confidently.

According to the same source, the fiscal consolidation in the health sector will reach 950 million euro over the next two years. The changes introduced in the health care system will require the insured to pay 30% of their treatment in private clinics that have contracts signed with the National Organization for Health Care Provision. Moreover, with the introduction of generic medicines in the Greek market, the Ministry will cover the cost of the cheapest brand of a medicine and those insured in the agricultural fund will face a further cut in the right to use free medicines.

Minister of Health Andreas Likoretzos and the Minister of State Administration Antonis Manitakis attended the meeting with lenders, but no consensus has been reached. Likoretzos and Manitakis are in charge of the two key ministries, which are to implement reforms crucial to the reduction of spending.

The heads of the lenders’ mission Paul Thomsen from the International Monetary Fund, Matthias Morse from the European Union and Klaus Masuch from the European Commission remained in the office of Finance Minister Yiannis Stournaras for more than seven hours. The ministers in Antonis Samaras’s government were entering and leaving the negotiations disturbed. It seems that Greece will not be ready with the final package of measures by the summit of European Union leaders on Thursday, 18 October. The expectations are that it will convene an extraordinary meeting of euro zone finance ministers to decide on the Greek issue. It will discuss the payment of 31.5 billion euro and will possibly permit an extension of the recovery programme for another two years.

High costs of the National Health Organization and the need for redundancies in the public sector are the two issues that the Greek political circles resist most seriously. Public administration and health care are hampering the completion of negotiations between Greece and the supervisory Troika the most. The rumours circulating in journalistic circles in Athens are that the supervisors will not retreat. Even if a common path to health issues affecting the sector were found, negotiations would not be completed before the government takes a formal obligation to fire employees in public organizations planned for closure. However, public discussion of the cuts in public administration remains taboo in Greece.

Meanwhile, the Foundation for Economic and Industrial Research (IOBE) issued a quarterly report on the progress of the Greek economy. The institute estimates that 2012 will end with a recession of 6.6%. The unemployment rate this year will be 24.2% and the percentage of the long-term unemployed (outside the labour market for over three years) is 60% of the total unemployed in the country. The institute notes that the average percentage of long-term unemployed in the European Union is 47%. The decline in consumption in the country compared to 2011 is 8.5%, but inflation is 1.5%. Economists note that the negotiations with the supervisors have been delayed for too long, which is putting the Greek economy to the test.