Greece must make ‘extra effort’

Protesting Greek workers in AthensThere have been mass protests in Greece over the government’s austerity measures

Greece’s international lenders have agreed the latest instalment of a loan to the debt-stricken country, but say Greece must make “an extra effort” to address its deficit next year.

In May, the EU and the IMF agreed a rescue package worth up to 110bn euros ($145bn; £91bn) over three years.

Greece will now receive the third tranche of that loan, worth 9bn euros.

But the government has had to agree new measures “to broaden tax bases and eliminate wasteful spending”.

Greece is aiming to reduce its deficit to 7.5% of GDP in 2011 from the 15.4% it stood at last year.

Staff teams from the European Union, European Central Bank (ECB) and International Monetary Fund have now concluded their second review of Greece’s economic programme.

In a joint statement, they said that the programme remained “broadly on track” and they expected the Greek economy “to begin turning around” in 2011.

Analysis

The review of the international inspectors is music to the ears of the Greek government.

The heads of the European Commission and IMF delegations declared that the reforms were broadly on track, and that they regarded as impressive the savings that the Greeks had made during a deep recession.

But the team believes that Greece is at a crossroads and needs to continue to make profound structural reforms.

In particular they want to see cuts in the national health service and the loss-making state-owned companies such as the railways.

The IMF believes these organisations are overstaffed and that in some cases employees are overpaid.

The IMF representative Poul Thomsen said there would have to be job cuts, but he hoped that they could be achieved by natural wastage, by replacing only one of every five people leaving voluntarily.

But the statement went on: “At the same time, data revisions for 2009 and weaker-than-projected revenue collection mean that an extra effort will be needed to meet the deficit target of 7.5% of GDP in 2011, which the government has reaffirmed.”

New measures have been agreed in the areas of health spending, state enterprises and tax administration.

The next review of Greece’s progress is scheduled for February.

The Greek government has made efforts to cut its spending this year, which has led to violent protests and strikes throughout the country.

Last week, the government unveiled an austerity budget for 2011 which aims to cut health and defence spending, and increase the sales tax on most retail items.

On Monday, the Greek Ministry of Finance said the country’s budget deficit for the year to October stood at 17.33bn euros.

This was down 30.2% on the same period in 2009, but below the targeted 32.2% for the ten months as published in the budget.

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