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House-ridden PM, Greece face crucial audit

02 July 2012, 16:05 CET
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(ATHENS) - Greek Prime Minister Antonis Samaras on Monday huddled with ministers and allies ahead of a crucial creditor audit as a European Central Bank official urged a return to tough reforms.

Samaras, who is still recovering from major eye surgery at home, was set to meet at 1500 GMT with the leaders of the socialist and moderate leftist parties that are backing his coalition government, his office said.

ECB representative Joerg Asmussen, who spoke at an economics conference in Athens on Monday, said the government must put the country's bailout programme back on track and that Greeks must get behind reforms to ensure their success.

"The programme is the best option for Greece," he said, referring to the austerity measures that are required as as part of the rescue loans that have been keeping Greek economy alive and warned against further delays.

Greece was expecting a visit from the "troika" of credit auditors from the ECB, the European Union and the International Monetary Fund this week, in the aftermath of last week's EU summit that has raised hopes for possible renegotiations.

The creditors will assess the overall progress Greece has made in implementing structural reforms that are part of the EU-IMF bailout package.

A positive audit is required for the release the next portion of rescue funds under the country's latest 130 billion euro ($163 billion) bailout, with the government coffers expected to be empty by the end of the month.

The EU summit decision that allowed Spain's troubled banks to be recapitalised directly from the eurozone's 500-billion-euro rescue fund has raised hopes that the Greek government can renegotiate the terms of its loan agreements.

The Brussels decision takes the burden of rescuing banks off the national budgets of troubled countries and is of great interest to Greece.

Rescuing lenders was a key component of the latest Greek rescue package, which provided 50 billion euros to recapitalise private lenders like the National Bank of Greece or Alpha Bank.

The banks were hit hard by the bailout package which included a write-off of roughly half the amount Greece owed private investors, especially Greek lenders.

Since that painful restructuring, about 18 billion euros in rescue funds have landed at the banks, which would likely complicate any change in the terms the funds were originally granted.

In view of the upcoming crucial audit, Monday was full of preparatory meetings for the premier and his ministers.

Incoming finance minister Yiannis Stournaras discussed with other ministers the agenda for the upcoming visit of the creditors over a two-hour Monday meeting, the state-owned Athens News Agency said.

The government remains tight-lipped over local media reports of Samaras getting ready to request similar conditions offered Madrid by EU partners and officially maintains it is sticking by its agreed bailout commitments.

"The government has to move forward by showing its commitment towards carrying out structural changes and reforms," Development Minister Kostis Hadzidakis told state broadcaster NET over the weekend.

Deputy Finance Minister Christos Staikouras stressed the government was committed to achieving its financial goals and implementing reforms within the agreed economic policy programme, in a newspaper interview on Sunday.

Adjustments would only be possible, he said, if policies "proved to be financially ineffective and socially unfair", he carefully added.

But Eurogroup head Jean-Claude Juncker has pointed out that Greece's case was different to Spain and Italy's.

"I believe that a strict budget must continue to be applied in Greece because Greece must definitely reform its public finances, it must improve its falling competitiveness and [correct the] weaknesses of Greece," he told ANA after the EU summit.

Greece's conservative-led government was formed after elections on June 17, when Greeks returned to the polls for the second time in two months following an inconclusive May 6 ballot that resulted in a political deadlock.

The political stalemate put all reforms on hold, but the government's bleak financial situation puts pressure on it to get them back on track although Samaras had pledged in his pre-election campaign to renegotiate the unpopular austerity policies required under the bailout.


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