Greece Agrees With Troika on Need to Strengthen Policy

Greece, Troika Agree on Need to Strengthen Policy Efforts
Customers browse discounted goods for sale at a "one euro store" in Athens. Photographer: Nikos Pilos/Bloomberg

Greece and its international creditors agreed on the need to strengthen policy efforts to support the economy and comply with its bailout terms after nearly two weeks of meetings in Athens.

Representatives from the so-called troika of the European Commission, European Central Bank and International Monetary Fund met with Greek Finance Minister Yannis Stournaras in Athens yesterday at the conclusion of the meetings. The talks will determine whether Greece continues receiving funds from the country’s 240 billion euros ($297 billion) of rescue packages.

“The discussions on the implementation of the program were productive and there was an overall agreement on the need to strengthen policy efforts to achieve its objectives,” the troika institutions said in a joint statement yesterday. Inspectors from the country’s creditors will return to Athens in early September to continue the talks.

Greek Prime Minister Antonis Samaras on Aug. 1 wrenched agreement from the two party leaders supporting his coalition government on the need to determine 11.5 billion euros of budget cuts for 2013 and 2014 to keep the international rescue funds flowing. That package must be completed by early September, before a meeting of finance ministers from the 17-nation euro area, a Greek Finance Ministry official, who asked not to be named, said after yesterday’s meeting.

Samaras Meeting

Samaras is set to meet with the leaders of his coalition supporters at 4 p.m. today. They are due to discuss the progress made on the budget saving package as well as state-asset sales.

The Athens benchmark general index rose 1.5 percent to 607.17 at 2 p.m. in Athens. European stocks rose and the region’s shared currency erased gains after Italian Prime Minister Mario Monti told Germany’s Der Spiegel magazine that disagreements within the 17-nation euro area are undermining the future of the currency bloc. The Stoxx Europe 600 Index added 0.2 percent. The euro slid 0.3 percent to $1.2354.

“We made a lot of good progress,” IMF representative Poul Thomsen said in Athens. “We’ll take a break now and come back in early September.”

Five-Year Recession

Greece is in its fifth year of a recession that has been worsened by the austerity measures to cut a budget deficit that reached more than five times the euro-area’s limit in 2009, sparking the continent’s debt crisis. The country conducted the biggest sovereign-debt restructuring in history this year before elections in May and June plunged it into political turmoil and put its place in the euro bloc at risk.

“This weekend’s headlines are positive but it does not mean that Greece is out of the woods,” said Thomas Costerg, an economist at Standard Chartered Bank in London. “Greece is running a marathon, not a 100 meter race, and the finish line is still far away.”

A request for a new funding package would run into “bailout fatigue” which is high in creditor countries, while the “willingness to provide further lifelines is low,” he said.

Samaras has faced discord from the leaders supporting his coalition over reluctance to immediately press for more time to implement the budget measures. A two-year extension to the current economic reform plan would likely require more funding support.

Troika Meeting

The troika representatives have been in Athens since July 24, meeting with ministers and political leaders to determine whether Greece is meeting the conditions to get the next batch of funds.

The country risks running out of money without the disbursement of 4.2 billion euros that was initially due in June as the first instalment of a 31 billion-euro transfer.

Greece will sell 625 million euros of 26-week Treasury bills tomorrow. The country may sell 6 billion euros of such bills this month, 2 billion euros more than initially planned, and tap bank recapitalization funds in order to cover its financing needs, Kathimerini reported on Aug. 1, without saying how it got the information.

The government is seeking funding to pay 3.2 billion euros of redemptions for bonds held by the ECB that mature Aug. 20, the Athens-based newspaper said.

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