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First yellow card for the Greek ministers who this week had to present analytical lists with cuts in their institutional budgets. Greece has to save 11.5 billion euro for 2013-2014 from the ministries' budget expenses, as their leaders had to present the plan for cuts before Finance Minister Yiannis Stournaras. Not only did they not manage to present the expected levels of savings they had to undertake, but some of them didn’t even have specific proposals as to where these cuts should come from.

Without a clear idea what the specific measures for expenses consolidation will be, the Greek government cannot sit at the negotiating table with the supervisory Troika from the European Central Bank, the International Monetary Fund and the European Commission. After the Greek ministers appeared unprepared before Stournaras, senior sources from the Financial Ministry said: “At this stage we want the ministers to present their proposals (for cuts). They, however, have to be realistic. It is not possiblefor a minister to say, that he or she will cut 100 million euro, when we know that in the Memorandum and in the Centre of Planning and Economic Research the same ministry can save the budget two billion euro.” The Financial Ministry explained that the fiscal consolidation of the public administration is a team game and they don’t want to enforce horizontal cuts yet. “We are obliged, as a ministry, to have specific proposals and numbers when the Troika comes.”

The International Monetary Fund issued a new report on the situation in Greece and prognoses are more than pessimistic. The deviations in the current budget deficit are two billion euro. Its planned amount by the end of 2012 was 6.7% of GDP, but now the Fund estimates that it can fall below 7% of GDP. The discrepancies between the planned and the achieved in Greece will inevitably affect the level of external debt. At the speed the Greek economy is moving, the country’s foreign debt is expected to hit new peaks in 2013. The Mediterranean country’s debt will exceed 170% of GDP in 2013. The report of the International Monetary Fund says that the macroeconomic state’s worsening and the lack of perseverance in the implementation of reforms has a serious impact on revenue gathering in the treasury. On the other hand, limited funding results in gaps regarding the fulfillment of the budget expenditure parts.

The Fund insists that besides observing the obligations according to the Memorandum of financial assistance, the government has to take care of banks’ liquidity. Together with the creation of conditions for the stabilization of the macroeconomic climate, the state’s priority is the stimulation of structural reforms in the financial system. Bank consolidation and their capital stabilization are crucial for improvement of the country’s situation.

In order to apply the necessary reforms, the Greek government intends to ask for a one to two yearprolongation of the assistance programme provided by the International Monetary Fund and the European countries. This means that Greece will need additional resources, currently estimated at about 20 billion euro. “We frown upon an elongation of the programme, if you don’t regain confidence by the implementation of this year’s budget”, German Deputy Foreign Minister, Michael Link, said categorically at a meeting with Stournaras.

Some of the heaviest cuts are expected to be made in the Ministry of Labour and Social Security. It has to cut down some 3.5 - 4 billion euro of its two-year budget. The main decrease will come from the implementation of additional criteria for social benefits payment, a ceiling for pensions of up to 2,400 euro, and a cut in the operating expenses. In the Ministry of Interior, 25 municipal organizations are expected to be closed, in addition to decreasing salaries in order to save 2.1 billion euro.

The lowest cuts will be in the Ministry of Education, which will have to save 150 million euro mainly through mergers and closures of schools. The Ministry of National Defence is currently preparing an alternative plan, by which to avoid the additional salary cuts for uniformed officers. The Ministry of Health also has the task of cutting at least two billion of its expenses for delivery of drugs and operating expenses.

Meanwhile, the Greek Public Debt Management Agency entered again the foreign markets with a 3-month treasury bonds auction and raised 1.63 billion euro. The interest rate on July debt fell by 0.03% compared to the previous month, and anchored at 4.28%. Demand was covered 2.12 times, showing a slight decrease in investors’ interest, compared to the previous auction of the same type of securities, when demand was covered 2.19 times. Athens Exchange closed with loses of 1.22% compared to Monday’s session. The turnover reached 17.4 million euro, and the major index at closure was 12.38 points. The biggest losses are for the food sector (-4.64%), the raw materials sector (3.13%), and the sector of financial services (1.29%).