Europe Pushing Greece To Cut Deficit By Further 0.7% Of GDP

Europe is pushing for Greece to cut its deficit by an additional 0.7% of gross domestic product this year in order to win further euro-zone financing, but the International Monetary Fund fears existing targets may already be stretching the limits of what's politically possible, according to an official close to the talks.


A deteriorating Greek recession, tightening credit conditions and the inability of Athens to implement some of the structural reforms required under a EUR110 billion bailout program has pushed Greece's deficit further into the red.

While Europe wants Greece to offset the deficit increase with additional measures to lower government costs and raise revenues, the IMF wants Greece to simply stick to the existing deficit targets, the official said.

Late last week, talks over the next tranche of funding needed for Greece to meet its payments were temporarily suspended.

Earlier this week, Greek authorities said they planned to accelerate the existing program of structural reforms, including an ambitious privatization program. But protests from a number of sectors--including taxi drivers, lawyers and pharmacists--and support for strikes from the political opposition are heightening fears that Athens won't be able to meet existing program conditions.

"There are some serious concerns about the capacity of Greek government to implement these structural reforms," the official said.

The IMF's executive board is scheduled to meet informally on the Greek program next week, and talks between the troika--the European Union, European Central Bank and the IMF--and Athens could resume next week, the official said.

Another person familiar with the matter said the IMF's board was originally scheduled to consider the next tranche of Greek funding on Sept. 15, but because of the breakdown in negotiations, that date will have to be pushed back.

Several people close to the matter said IMF Managing Director Christine Lagarde is planning to meet Greek Prime Minister George Papandreou on Sept. 20 ahead of the IMF's annual meetings.

The first official said there's been increasing reluctance from IMF emerging market board members, particularly from Asia, to continue lending Greece money







 
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