Greece seeks bridging loan
By Bridging Loan Directory -
Greece’s coalition government will seek a bridging loan to tide it over while it scrambles to find 11.7 billion euros of spending cuts to bring a derailed bailout plan back on track and appease exasperated international lenders according to Reuters.
The measures must be submitted for approval by July 24, when auditors of the so-called “troika” of the European Union, the International Monetary Fund and the European Central Bank are expected to return to Athens for a check-up mission.
The visit, and subsequent haggling that is expected to last until September, will determine whether the EU and IMF continue bankrolling Athens or abandon it and let it slide towards chaotic default and eventual exit from the euro zone.
The troika has already turned the screws on cash-strapped Athens, effectively suspending payments under its ongoing 130 billion euro rescue and prompting it to seek a bridging loan from its lenders to cover financing needs until September.
“We are fighting to secure the bridging loan by September,” a finance ministry official told reporters, speaking on condition of anonymity.
Cabinet members and senior ministry officials have been holding daily meetings to thrash out the spending cuts. Finance Minister Yannis Stournaras is expected to submit on Wednesday a draft list to the leaders of the three parties comprising the country’s ruling coalition.
“Since last Thursday, there is a methodical effort by all ministers to find realistic proposals,” Deputy Finance Minister Christos Staikouras told Reuters. “We must be ready by July 23,” he added.
The cuts, equivalent to 5.5 percent of the country’s GDP, must be enforced over the next two years for Greece’s budget deficit to narrow to below 3 percent of GDP by the end of 2014 from 9.3 percent in 2011.
The government is considering a wide range of cuts, such as lowering caps on high pensions, closing tax loopholes, reducing the government’s operating expenses, cutting public hospitals’ costs and cracking down on fraud to curb social spending.
Athens has pledged to streamline public administration to make it leaner. The government is also considering proposals to extend military service to reduce its need for professional soldiers and to make the church pay half of the salaries of priests, thousands of whom are on the government’s payroll.
But Greece’s fragile coalition government has little scope to find the savings after it pledged to austerity-hurt voters it would not fire any civil servants and avoid across-the-board cuts of pensions and public sector wages.
“We have made plans for cuts that do not affect human souls,” Interior Minister Evyrpidis Stylianidis said after meeting Samaras on Tuesday.
The three-party coalition was cobbled together after pro-bailout parties won a narrow victory in elections last month. Conservative Prime Minister Antonis Samaras has pledged to renegotiate the bailout and soften its terms, particularly by spreading the 11.7 billion euro cuts over four years to soften their impact on the economy.
He will meet the leaders of the co-ruling Socialist party, Evangelos Venizelos, and leftist Democratic Left, Fotis Kouvelis, on Wednesday morning to secure their approval for the cuts before final decisions are taken.
Austerity policies implemented since the country’s first EU/IMF bailout in May 2010 have turned Greece’s recession into its longest and deepest since World War 2. Unemployment climbed to a record 22.5 percent in April. Economic output has shrunk by about a fifth since 2008, when the country’s recession started.
The finance ministry official acknowledged that pushing through the cuts would not be easy, but that the government was determined to come up with the austerity measures.
“It’s difficult, but we will make it,” the official said.
Greece is already finding it difficult to meet its current fiscal targets, let alone future ones. Government paralysis during the country’s long election period, reluctance to implement privatisations and fiscal cuts and the recession have thrown the country’s bailout plan into disarray.
Tax revenues were almost 1 billion euros below target in the first half of the year. The country’s privatisation agency said it would not manage to raise more than 3 billion euros this year as had been planned. And the country has failed over a string of targets set out under its bailout plan since March.