x Abu Dhabi, UAEMonday 24 July 2017

EU and IMF chiefs due to discuss Greek crisis

Crucial days ahead as international finance experts arrive in Greece to discuss ?53bn debt options.

George Papaconstantinou, the Greek finance minister at the centre of the country's debt crisis, is surviving on four hours of sleep a night and has struggled to get to his office after his route was blocked by striking employees. He is acutely aware of the problems Greece faces. "We know we don't have a blank cheque," he said at a temporary office in a tax and customs administration building. "We have public support as long as people feel everyone is bearing the burden equally."

Mr Papaconstantinou has acknowledged that Greece needs to borrow or refinance ?53 billion (Dh264.73bn) this year, including ?20bn in April and May. "We want to be able to borrow on the same terms as other countries in the euro zone," said George Papandreou, the prime minister. For Mr Papandreou and his fellow countrymen, this will be a crucial week with a delegation of EU and IMF officials arriving in Athens to discuss further austerity measures to fix the country's bloated budget deficit.

Their arrival coincides with government plans to test the waters with its second bond issue of the year and with preparations by trade unions to stage a general strike tomorrow. The government will meet representatives from the European Commission, the European Central Bank and IMF technical experts to discuss a new set of measures worth about ?2.5bn over and above what it has already announced to cut the deficit.

Greece is under intense pressure from the EU and financial markets to bring down its budget gap, which hit an estimated 12.7 per cent of GDP last year, four times above EU limits. The government has pledged to cut that deficit to 8.7 per cent of GDP this year, and below the EU's 3 per cent limit by 2012. "Despite worries of social unrest, the government will discuss the new measures with the visiting delegation and is prepared to do what's needed to calm down the markets and address European Union concerns," a person familiar with the Greek government's plan said.

"The new package will be announced before the March 16 meeting of the [European] finance ministers. Greece will do its part. Now it's time for the European partners to show their solidarity." Earlier this month, EU leaders pledged solidarity with Greece as it struggles to cover the ?53bn it needs to find. Mr Papandreou's government has not asked for a bailout package, but if it did it would prefer a long-term loan of up to ?25bn rather than bond guarantees from EU partners.

"The government is pretty certain that the bond issue will be covered, but in the worst-case scenario it expects the remainder to be picked up by European partners like France and Germany," said a second person close to the government. The new measures under discussion include an increase in Greece's current value added tax rate of 19 per cent, more cuts in civil-service pay, higher duties on luxury items and a further rise in fuel taxes.

The government has already announced a series of measures that include freezing civil-service pay, cutting public-sector entitlements by an average of 10 per cent and closing dozens of tax loopholes for certain professions. But these measures have already stoked up resistance, with the public-sector Civil Servants Union announcing plans to stage a 24-hour strike tomorrow. A separate strike has been called by its much bigger private-sector counterpart, the General Confederation of Greek Workers.

Opinion polls show the public remains behind the government. According to one survey published at the weekend in the Ethnos newspaper, 75.8 per cent of Greeks think the unions should suspend all strike action for as long as the country remains mired in crisis. "The government is determined not to bow to any workers' demands regardless of how just they are," one official said. "These are extraordinary times and every single Greek must understand that sacrifices are needed."

As for Mr Papaconstantinou, he faces another week of sleepless nights. * with Reuters and Dow Jones