Greece looks to easier rescue terms, eurozone gloom returns

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The new Greek government presents a strategy to salvage its debt rescue programme on Friday, to win favour with EU-IMF auditors and gain room to renegotiate terms with its creditors.
But the state of the economy is grim and the eurozone climate is tough.
Creditors have warned Greece that it is too far short of targets to merit a new deal, financial markets have again turned sceptical about eurozone prospects.
And the IMF is gloomy about the global outlook, warning that growth could turn down even faster if the eurozone crisis drags on.
Meanwhile Greece must win the confidence of the auditors to obtain the next slice of aid money which it needs to pay current expenditure.
Finance Minister Yannis Stournaras has told reporters that Greece’s recovery programme is “off-track in certain areas” after two electoral campaigns in two months, and that Greece still faces “difficult years ahead.”
A finance ministry source told AFP on Friday: “We are not abandoning the renegotiation claim but certain things need to be done first.”
The Financial Times reported on Thursday that Greece had altogether dropped its demand to ease rescue terms, citing the new finance minister.
“We can’t ask for anything from our creditors before we get it back on course,” it quoted Stournaras as saying.
An aide to the prime minister told the state-run Athens News Agency: “First we must apply policies and have tangible results to show, and then claim a renegotiation.”
Greek ministers have been instructed by the government to furnish data and refrain from making renegotiation requests, other Greek news reports said.
Portugal is also struggling to meet its rescue targets. The government said on Friday it might extend a pay cut for civil servants to all employees after the constitutional court struck down the initial measures as discriminatory.
Pressure is rising on the government to seek extra rescue funding of more time to meet deficit targets, but Prime Minister Pedro Passos Coelho has ruled this out.
Eurozone and EU finance ministers meet early next week to follow up on a summit last week, presented as a breakthrough in getting on top of the debt crisis, but decisions by the European Central Bank on Thursday disappointed markets, despite a rate cut.
The cost of borrowing for Spain and Italy is again on the rise, even though Ireland made a successful return to the debt market.
Against this background, Greek Prime Minister Antonis Samaras will unveil his government’s strategy on revising the country’s EU-IMF bailout amid creditor warnings that the country is too far behind its targets.
Samaras will address parliament after 1530 GMT at the start of a three-day debate culminating in a vote of confidence on Sunday which the three-party coalition supporting his government is expected to win.
The 61-year-old former foreign minister took office after June 17 elections, promising an austerity-weary nation that he would re-examine salary cuts, tax rises and job losses.
The economy is in the fifth year of recession.
But Samaras has run into opposition from Greece’s so-called ‘troika’ of creditors — the EU, the International Monetary Fund and the European Central Bank, and Greek officials are abandoning hopes of an immediate renegotiation.
Samaras told auditors he was determined to “speed up structural reforms”, his office said on Thursday.
In his speech to parliament, he is expected to announce an acceleration of Greece’s privatisation drive, to satisfy Brussels and the IMF, while simultaneously promising Greeks that more job and pay cuts are out of the question.
In a letter to EU leaders last week, Samaras — housebound at the time after major eye surgery — wrote that Greece must obtain “necessary modifications” to its rescue programme in order to fight off recession and reach its economic goals.
Greece has been rescued twice, and in April benefited from a big write-off of debt owed to private investors.
Under the current terms of its bailout, Greece must adopt further cuts worth 11.5 billion euros ($14.2 billion) by 2013 and reduce the state payroll by 15,000 people in 2012.
The EU-IMF audit is expected to last weeks, with actual negotiations with creditors set to begin only at the end of the month.
An Athens-based EU source said on Friday that the mission’s senior auditors would leave at the end of the week.
“Lower-level technical staff might stay a little longer, but they will return at the end of July and the supervisors will follow,” the official said, adding: “This was a first contact with the new government.”