Creditors spell out Greece’s austerity measures

BERLIN—Greece’s international creditors have spelled out the spending cuts and reforms that Athens has to introduce before it can receive vital bailout cash, according to a draft document obtained by The Associated Press yesterday. The measures—which range from getting tougher with tax evaders to cutting prescription drug budgets—reflect the international community’s growing distrust of Greek politicians and their history of backsliding on key reforms.

The cuts are part of the large austerity package that lawmakers in Athens passed over the weekend amid violent protests and riots. The country’s international creditors—the other 16 countries that use the euro and the International Monetary Fund—are now insisting that they have to be implemented before Greece can get a second, €130 billion ($172 billion) bailout. Without that money, Greece will be forced into a disorderly default on its debts by the end of March that could seriously disrupt Europe’s bank finances and the world’s financial markets.

“I can understand the pain and turmoil in Greece,” said Olli Rehn, the European Union’s economic and monetary affairs commissioner. “But at the same time, this is the framework which has been decided,” he said. “It is really in the interest of everyone in Greece and Europe now to make this work and avoid a disorderly default of Greece, which would have devastating consequences,” Rehn said. Debt-stricken Greece faces a €14.5 billion (US$19 billion) bond redemption deadline which it cannot afford to pay on March 20 and will therefore need the bailout in place by then.

The detail and number of the demands is evidence of the growing mistrust between Greece and its creditors. The country has been criticised in the past for not putting into practice reforms that were either promised and not delivered or enacted into law but never enforced. This time, the international creditors want to see tangible results and have insisted on a total of €2.6 billion (US$3.45 billion) in cuts that need to be implemented before they transfer any more money. Included in the measures are a €1 billion (US$1.32 billion) cut in what the country spends on medicine in its state health service, and a €300 million (US$398 million) reduction in the defence budget. Reducing central government and election-related spending will also reduce spending by €270 million (US$358 million), and subsidies of €300 million (US$398 million) to pension funds will also be slashed.

The document says the Greek government must also slash its public investment budget by €400 million (US$530 million). On top of this, Greece has to find further savings worth €325 million (US$431 million) to meet its debt reduction targets. Greece’s cabinet was set to discuss the new cuts yesterday and the EU’s Rehn has demanded that the details be ready for eurozone finance ministers to assess when they meet in Brussels today.

That meeting was cancelled later when the head of the Eurogroup, a gathering of eurozone finance ministers, says he has cancelled a meeting on Greece’s bailout planned for today as Athens did not fulfill all the demands. Jean-Claude Juncker, who is also prime minister of Luxembourg, said the Eurogroup was still missing information from Athens on how it plans to save promised €325 million ($428 million). Greece is under massive time pressure to secure a €130 billion bailout. It also needs approval for a separate debt relief deal with private creditors that has to be done by March 20 and needs several weeks to implement.

Germany, Europe’s biggest economy, has been taking a tough line on Greek compliance. The country’s Economy Minister, Philip Roesler, called on Athens to deliver on its pledges, saying Sunday’s vote in Parliament was “important but even more important is the concrete implementation.” “Decisions in Parliament are not enough, they then also have to be implemented,” he said.

The detailed 49-page document, obtained by the AP from an official in Berlin who received an advance copy, is the Memorandum of Understanding—the legal basis for all international bailouts. The memorandum also lists many measures that Greece has to implement after the disbursement of its next batch of bailout loans, including structural reforms meant to boost the country’s competitiveness. The finance ministers of Greece and the rest of the 17-country eurozone were expected to sign the Memorandum of Understanding at their meeting today.

AP