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For the first time, the supervisory Troika is leaving without coming to an agreement with the government

02 September 2011 / 15:09:09  GRReporter
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For the first time, the representatives of the supervisory Troika of the European Commission, the European Central Bank and the International Monetary Fund are leaving Athens without an agreement with the government of George Papandreou. As GRReporter already informed, instead of decreasing, the government deficit is increasing significantly. It is impossible to achieve the deficit of 7.5 per cent, as planned in the Memorandum of financial aid. The Greek deficit for 2011 will form at about 10 per cent, i.e. over 2 per cent more than the desired value. The Troika experts tend to agree that one of two percentages is due to the deeper than expected recession in Greece. However, the other percentage in their opinion is due to the incomplete work by the socialist government and the fact that all reforms remain on paper and are not implemented in practice.

Therefore, they insist the government to resort to savings and to reduce the waste of € 2.5 billion. This is something the Minister of Finance Evangelos Venizelos disagreed with. He called by phone the Prime Minister George Papandreou, who is in Paris for the international conference on Libya and Papandreou ordered not to engage in additional measures. Thus, the three representatives of the supervisory Troika headed by Poul Thomsen from the International Monetary Fund had to do nothing but to cut off their mission and to address the euro area finance ministers.

The experts arrived in Athens on Monday to assess the progress of Greece on the implementation of the reforms and to give a green light for the payment of the sixth tranche of the bailout to the troubled Mediterranean economy. After cutting off their mission, the estimated amount of € 8 billion of the loan could only be paid after the political decision of the euro zone finance ministers.

The unprecedented withdrawal of the Troika was preceded by lengthy discussions with Evangelos Venizelos that started early yesterday and lasted until midnight hours with a break at noon. Apart from the negotiations to settle the deficit to make it look less impudent, the experts were irritated by the long delay of privatization procedures, which in practice remain only on paper. The third reason for Poul Thomsen, Klaus Mazouch and Matthias Morse’s dissatisfaction is the limited tax base, in which taxes are actually drained from the same social groups, and major offenders go unpunished.

Another effect of multiplying the tax in Greece is the growth of recession. Financial experts estimate that many of the higher taxes cost much more to the Greek economy from cost cuts. They deepen the recession and stultify the efforts made to date. The full divergence of goals with the implementation of the obligations under the Memorandum of financial aid will soon run Europe out of patience.

 "The political world proves that it is not able to realize the seriousness of the situation. While the government is unable to gather the courage to close unprofitable state enterprises and institutions and take serious measures, it is certain that Greece is getting closer to default and to exiting the euro area" is the opinion of the economist Miranda Ksafa, a former senior official at the International Monetary Fund. She made it clear that while the euro zone banks are strengthening their capital and becoming stronger, and the Greek government continues to neglect the most important steps in the recovery program, Greece is inevitably tending to the drachma.

The only way, according to Ksafa, Greece to regain the confidence of European institutions and the International Monetary Fund is the immediate closure of at least one public enterprise that is proven to be unprofitable and that burdens the state budget. She gave the example of the state railways, which have a deficit of € 10 billion and continue to operate. "To persuade the Troika to approve the sixth tranche of the aid we should close at least one public enterprise like the railways (OCE) and lay off its seven thousand employees. Transferring them to other positions will not reduce the costs in the budget." Miranda Ksafa is adamant that the dismissal of 100,000 civil servants would cost less to the Greek budget than the new higher taxes and extraordinary charges.

The budget expenditures remain almost unchanged except for the reduction of pensions and social securities. Ksafa indicated that they are only 30% of the expenditure in the public deficit and their reduction could not be considered a priority. Costs restructuring should come from the remaining 70%, which are absorbed primarily by the state administration.

Tags: Supervisory TroikaExpertsSixth trancheFinancial aidGreek debtEconomic crisis
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