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The Troika has given the Greek government 40 days to vote on the draft budget for 2012 on first reading, to enact and implement the labour reserve, the unified payroll table and all agreed terms and conditions before payment of the sixth tranche of the aid. "To ensure further deficit reduction in a socially acceptable way and to create conditions for restoring economic growth, the Greek authorities should insist on more serious structural reforms in the public sector and the economy as a whole", reads the message of the supervisors from the International Monetary Fund, the European Central Bank and the European Commission. They emphasize that the success of the programme still depends on the public sector recovery and the voluntary involvement of private holders of Greek government bonds (PSI-Private Sector Involvement) in the 21% debt reduction, as agreed on July 21 this year.

The Troika noted that when Eurogroup and the Executive Board of the International Monetary Fund have approved the conclusions of the fifth evaluation of the implementation of the Greek recovery programme, the next tranche of the financial aid would be paid. It amounts to € 8 billion, € 5.8 billion of which will come from the Member States of the euro area and € 2.2 billion – from the International Monetary Fund. The amount is likely to be paid in early November.

The recession is deeper than expected in June at the previous inspection and there are no opportunities for growth before 2013. Greece has no chance to regain the lost confidence of investors before implementing major reforms. The Troika noted the slight increase in exports, which is a good sign, and in combination with keeping down the labour costs this could lead to more balanced and sustainable development in the next period in the medium term. Inflation has fallen significantly over the past year and is expected to remain below the euro zone average inflation rate in the near future.

In the financial sector, the Troika does not deny that the government has reduced the deficit significantly from the beginning of the programme, despite the strong recession, but it is not enough to reach the fiscal targets for 2011, largely due to the further reduction in GDP, but also to omissions in implementing some of the agreed measures. If the government sticks to the implementation of the updated medium term financial strategy, no additional measures will be required in 2012.

This does not apply for the period 2013-2014, when most likely Greece will have a new government. The Troika did not make this assumption but economic analysts in the country estimate that this is the most likely scenario, since the government of George Papandreou has not taken any obligations for this period. Medium-term fiscal strategy will be updated for the next two years in mid-2012 when it will become clear how many of the targets in the fiscal consolidation and structural reforms have been implemented. The Troika notes that the revenue-collecting mechanism should be improved, as it is one of the weak points of the Greek administration.

In the area of ​​privatization, the supervisors noted that the establishment of a fund for its management is a step forwards, although a particularly significant transaction has not yet been realized. Delays in preparation of privatization are largely due to the worsening market conditions that lead to significant loss of revenue. Nevertheless, the government insists that it is able to fulfill its commitment for € 35 billion revenue by the end of 2014. A key factor for the success of the programme is to protect the independence of the privatization fund from political pressure.

While Greece is waiting for the next tranche of the financial aid, the Public Debt Management Agency has released another issue of six-month Treasury bills, raising € 1.3 billion at an interest rate of 4.86 per cent. The slow, but surely increasing interest rate, which was 4.8 per cent for the same type of securities last month, reflects the markets’ rising non-confidence. The requested amount was covered 2.37 times, but there is no information about the participation of foreign investors in the auction. It was held by primary dealers in the market and the closing date of the transaction is Friday, October 14, 2011. Under the rules on the activity of primary dealers, non-competitive transactions may reach 30% of the amount of the auction and may be submitted until 12:00 in the evening of October 13 this year.