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Greece’s Debt Sustainability Seen by Monitors as More Uncertain

July 17 (Bloomberg) -- Uncertainty about Greek debt sustainability has increased after the government stumbled in selling state-owned enterprises, international monitors said in their latest report on the debt-stricken country.

“Downside risks have increased significantly compared to the second review, particularly as regards privatization proceeds,” the group comprising the European Commission, European Central Bank and International Monetary Fund said in the report provided to German lawmakers today. “Moreover, significant further delays in clearing arrears would exacerbate existing liquidity problems in the Greek economy.”

The outlook for Greece’s economic and fiscal recovery has been clouded by sluggish enactment of an economic overhaul and euro-area slump, the group said. That’s come on top of the the government’s failure to attract any bids for its gas monopoly.

Greek labor unions held their third general strike of the year yesterday in challenge to Prime Minister Antonis Samaras, who seeks to enforce a plan to put 25,000 public employees on notice for possible dismissal. His government must pass the measures for the country’s international creditors to sign off on the next loan disbursements.

Greece’s public debt is expected to peak at 175.6 percent of gross domestic product this year and drop below 120 percent of GDP by 2021 “assuming that Greece continues to strongly implement the program,” the report said.

The report, which is based on the findings of a two-part mission to Athens between June 4-19 and July 1-7, notes that Greece’s progress is “often slow,” though the program is “broadly on track.”

Far-reaching changes are still needed in public administration policies, improvements of the business environment, energy and justice, it said. The economy would “greatly benefit” from more determined implementation of the privatization program, it said.

To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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