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Cuts, reduced pensions, even higher excise duties are awaiting the Greeks from this winter.  These are some of the measures the Greek Ministry of Finance agreed with the supervisory Troika of the International Monetary Fund, the European Central Bank and the European Commission during the second videoconference this week. The gap in the implementation of the recovery program is approximately € 4.5 billion, which requires immediate action. Tired of listening to loud promises with no effect, the mission of the three institutions undertook a new policy. It no longer travels all the way from Washington, Frankfurt and Brussels to Athens to listen to excuses as to why Greece has failed to fulfil its obligations under the Memorandum of financial aid. The Troika holds videoconferences to see if the Greeks are ready with the measures and then assesses whether it makes sense to "go down" to Athens for another inspection, upon which the payment of the next tranche of the aid depends.

After the videoconference late on Tuesday evening, it became clear that the government has no choice but to face its greatest fears – cuts of at least 200,000 civil servants by 2014, 40% cuts in salaries and reform of 350 government organizations and enterprises. Otherwise, it will not receive the sixth tranche of the bailout, which is worth € 8 billion.

To gain time, Greece auctioned quarterly bills, which gained about € 1.62 billion at a very high interest rate of 4.56%. Although expensive, the sale of the bills was urgent, because the state has to repay old debts maturing at the end of September this year but there is no money in the treasury. In the next few days, Greece has to cover current liabilities of approximately € 4 billion and the sixth tranche of the aid has not yet been approved. The first round of negotiations has just finished and ensured that the Troika will return to Athens on Monday, September 26, this year to finish its inspection and to report on the status of the Greek economy.

Meanwhile, it became clear that the excise duty for heating oil will increase dramatically, equalling the levels of oil for fuel. The austerity plan said that this increase would be gradual. However, there is no time for gradual increases and the measure will become effective in full on October 15, 2011. From 0.80 to 0.85 eurocents per litre, the price of heating oil will rise to around € 1.40 per litre. Estimates show that this increase will bring around € 720 million this year. If the winter is cold, consumption of heating oil will rise despite the higher prices and the revenues from this measure may be even higher than expected.

Drastic cuts in the public sector and the broader public sector have also been the focus of the conference call between Venizelos and the Troika’s members. The supervisors have asked the public administration and the broader public sector to be reduced not only by 150,000 people by 2015, as initially planned, but by 200,000 employees for the same period in order to accelerate the fiscal adjustment in the budget. The position of the Minister of Finance to refuse job cuts and expand the labour reserve with 20,000 employees is no longer relevant and he should resort to dismissals. On this occasion, the Minister of Administrative Reform Dimitris Repas called the cabinet members to reduce all organizational units of the ministries and state-controlled agencies by 30%. However, the labour reserve issue is not clear yet and the government is not ready to abandon it completely.

The employees who will retain their public job will face cuts. The unified system for calculating the wages, which finally has to come into force in early October this year, will deprive the monthly salaries from a large number of additional allowances and the salaries will be aligned horizontally in all public institutions. The average reduction in public sector wages should reach between 30% and 40% of the total gross remuneration.

The Troika reminded the Minister of Finance that the Greek government took the obligation to merge and close 350 government organizations. There is a serious delay in this area, given that no decisions have been issued for the closure of the first 60 companies that were identified for liquidation in the middle of the year. Privatization remains an important issue that will be reviewed upon the Troika’s return to Athens. Venizelos had promised in public that Greece would have € 1.7 billion revenues from privatization at the end of September, but no big deal was officially announced so far. The Minister of Finance explained to the Troika that the course of the privatization is normal and some more time is necessary before the money gained from the deal to enter the treasury. It will soon become clear if this is true or an eye-wash to gain some more valuable time.

While the Greek government was playing cat-and-mouse with the supervisory Troika in the past two months, the value of Greek government bonds have lost about 25% of their market value. This makes the funding of Greek banks by the European Central Bank even more difficult, which ended up in the storm after the spread of the Greek debt crisis. From the rostrum of the Business Forum of the Economist this week, the Chairman of the National Bank of Greece Vassilis Rapanos asked the European Central Bank to be more flexible in valuing securities as collateral for credit institutions in periods of market volatility. Despite the difficult situation in which Greek bankers are, they say they keep things under control and the financial system is not at risk. A trump card remains the Fund for financial support provided for them, which avails € 30 billion to help the Greek banking system.