Next aid payment not a done deal
Troika says 5th payment to Greece may have to wait; recession proves deeper, longer than expected
The European Union, European Central Bank and International Monetary Fund mission to Greece said in a report yesterday that the next disbursement of Greek aid could not take place until it corrected the underfinancing in its adjustment program.
The long-awaited report by the so-called “troika” said Greece risked missing its deficit targets without further consolidation measures and that its recession appeared to be longer and deeper than initially expected.
“The financing strategy needs to be revised. Given the remoteness of Greece returning to funding markets in 2012, the adjustment program is now underfinanced,” it said. “The next disbursement cannot take place before this underfinancing is resolved.”
The fifth bailout payment was due to be made in June.
The report said that the Greek economy will contract 3.8 percent this year and expand 0.6 percent next year, according to the report e-mailed to journalists by German officials. The previous forecast for 2012 was for an expansion of 1.1 percent.
The troika said a privatization agency with an independent board, to which the European Commission and eurozone member countries could nominate members, would be set up shortly.
On the privatization front, Greece’s government may sell a 34 percent stake in gaming company OPAP this year, instead of 2012 as originally planned, it added. Also on a provisional list for disposal this year are the state’s 1.2 percent stake in National Bank and a 0.6 percent holding in Alpha Bank. News of a possible hitch in the next disbursement of aid to Greece came as Germany’s finance minister said private creditors must share the burden of more financial help for Athens in any deal to prevent the country from defaulting on its debts.
In a letter sent to Jean-Claude Trichet, president of the ECB, the IMF’s acting managing director John Lipsky and other top finance officials, Wolfgang Schaeuble proposed a bond swap that would extend debt repayments by seven years, giving Athens more time to reform its economy and overcome the debt crisis.
Such a move has previously been strongly opposed by the ECB on the grounds it could spread turmoil through the continent’s financial system, while rating agencies have warned it could be considered a default.