Greece wants extra time to implement austerity measures

15th August 2012

According to a document seen by the Financial Times, Greek Prime Minister Antonis Samaras will hold talks next week with both Angela Merkel and Francois Hollande to ask whether it's possible for country's new government to spread the agreed public spending cuts over four years instead of two.

Such a delay could be costly, though it might not require any contribution from any of Greece's eurozone partners, as the FT, notes: "According to the document, Greece would need additional funding of €20bn to support the budget as the annual deficit reduction in 2013-2014 would be smaller than planned. However, Athens is proposing to find the money without seeking help from eurozone partners."

"Funds would be raised from an existing IMF loan, issues of treasury bills and, Greece hopes, a postponement in the start of repayments of its first EU-IMF loan from 2016 until 2020, when it is due to begin paying back its second bailout loan."

Elisabeth Afseth, analyst at Investec, believes that the Greek government probably has a solid case for requesting a delay to its austerity plan, but predicts hostile opposition from Germany.

"The arguments for a delay may be sound, but patience is running very thin after serious delays to the first programme and renegotiations are coming less than 6 months into the second bailout."

"Wouldn't be surprised if we see some German politicians expressing an opinion on the proposal over the next few days, though serious discussions will come in September when the troika returns to Athens."

And the opposition to the Greek's request for an extra €16bn to €20bn in extra aid to reduce 150,000 civil service job losses, minimum wage and pension cuts, doesn't only extend to the Germans, as the Telegraph's Bruno Waterfield reports:

Jan Kees De Jager, the Dutch finance minister, maintained that there was "no alternative" to the painful austerity outside small alterations to the timetable of the cuts.

"With smarter measures then you can realise more, that is better, but an alternative to hard, painful reform, that alternative is not there," he said.

Austrian finance minister Maria Fekter warned Greece that two months of political turmoil meant that the Greek government would have to catch up, not slacken off the pace of its budget cuts.

"We will have to see how much time Greece missed due to its election campaign, if it missed too much, Greece will have to work even harder," she said.

And a eurozone diplomat said: "Greece has to realise that we have to win elections too and any more money from our taxpayers for Greeks is unsellable."

MarketWatch, meanwhile, says that U.S. stocks lost hold of their meager gains Tuesday as markets headed to a close following a report that Greece was looking for an extension to implement austerity programs.

"The Dow Jones Industrial Average (US:DJIA) closed up 2.71 points, or less than 0.1%, to 13,172.14, after trading as much as 53 points higher earlier in the session. In the final half-hour of trading, the Dow was down as much as 27 points."


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