EU Officials Threaten To Hold Back Funds As Greece Fails To Enact Reforms
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European Union and International Monetary Fund officials may freeze bailout payments to Greece worth 8.1 billion euros for three months, said a senior eurozone official on Wednesday, after Athens failed to enact necessary reforms and cuts to its bloated public sector.
European Union and International Monetary Fund officials may freeze bailout payments to Greece worth 8.1 billion euros for three months, said a senior eurozone official on Wednesday, after Athens failed to enact necessary reforms and cuts to its bloated public sector.
According to Reuters exclusive published on Tuesday, Greece was given three days to reassure its international creditors that it can deliver on conditions attached to its bailout in order to receive its next tranche of aid payment.
The payment, worth 8.1 billion euros, is one of the last big cash injections Athens will get before its 240 billion euros bailout package expires at the end of 2014.
At the centre of the dispute is the lack of progress Greece has made towards reforming its public sector, particularly in the area of “tax and custom collection or health care services”, said a senior eurozone official involved in the negotiations.
Related: Greece Must Tackle Rampant Tax Evasion: IMF
“All agreed that Greece has to deliver before the Eurogroup on Monday. That’s why they must present again on Friday,” the news agency quoted a second source as saying.
“No conclusion on the review, no disbursement,” said the first official, though he added that this situation remained unlikely. “Is it a disaster – No. Is it uncomfortable? – Yep,” he said, referring to an ongoing health check of Greece’s finances by the so-called troika.
Athens, which has about 2.2 billion euros of bonds to redeem in August, needs the talks to conclude successfully. But Greece has already missed a June deadline to put 12,500 state workers into a “mobility scheme”, under which they are transferred or laid off within a year.
Public sector layoffs are a controversial topic in Greece, which is struggling to get through its sixth consecutive year of recession and record-high 27 percent unemployment rate.
Related: Greece and Spain “in Depression, Not Recession”: Stiglitz
On Wednesday, a senior Greek finance official said “there is no chance that we will satisfy the current demands as they are set out”, but sought to downplay fears of what would happen if Greece did not receive aid payments in time. In a “worst-case scenario”, Greece could compensate by issuing additional treasury bills.
If Greek officials fail to strike a deal with its creditors by Monday, the IMF might be forced to withdraw from the bailout agreement to avoid violating its own rules, which require a borrower to be financed a year ahead.
That would heighten the risk that concerted efforts by policymakers over the past nine months to keep a lid on the eurozone crisis could unravel, at a time when tensions are rising in other troubled debtor countries.
Related: Lagarde Hopes IMF Work in Europe Will Be Appreciated “One Day”
