Greece is likely to receive an €8 billion aid tranche it needs to stave off bankruptcy in early November, EU, IMF and ECB inspectors said in a joint statement today.
The statement came after the troika concluded its week-long review of the country's finances.
In the statement, the troika said the Greek recession will be deeper than was anticipated in June and a recovery is now expected only from 2013 onwards.
“There is no evidence yet of improvement in investor sentiment and the related increase in investments, in part because the reform momentum has not gained the critical mass necessary to begin transforming the investment climate,” it said.
However, exports are rebounding - albeit from a low base - and a shift towards a more dynamic export sector, supported by a moderation of unit labour costs, should lead to more balanced and sustainable growth over the medium term. Inflation has come down over the last year and is expected to remain below the euro area average in the period ahead.”
It said the government had achieved a major reduction in its deficit. “However, the achievement of the fiscal target for 2011 is no longer within reach, partly because of a further drop in GDP, but also because of slippages in the implementation of some of the agreed measures.”
Final approval on the loan, which Greece needs to keep paying its bills past mid-November, will not come before the inspectors present a full report to euro zone finance ministers and the IMF board.
"Once the Eurogroup and the IMF's executive board have approved the conclusions of the fifth review, the next tranche of €8 billion - €5.8 billion by the euro area member states, and € 2.2 billion by the IMF - will become available, most likely, in early November," the statement said.
"The success of the programme continues to depend on mobilising adequate financing from private sector involvement (PSI) and the official sector. Ongoing discussions on PSI together with assurances provided by European leaders at their July 21st summit suggest that the program remains fully financed," it said.
The latest aid tranche will only provide temporary relief for Greece. As the crisis worsens, the focus has shifted to a review of a second bailout plan agreed in July, with the debt-choked country is expected to need even more support as its economy keeps shrinking more than expected.
Greece, in deep recession and struggling to contain a public debt expected to hit 162 per cent of gross domestic product this year, has promised sweeping austerity measures, including severe wage cuts for many public sector workers, mass layoffs and tax hikes that will hit middle class Greeks hard.
Civil servants protesting against austerity today blocked the general accounting office and the Interior Ministry calling for an end to lay-offs and pay cuts. In some areas of Athens, rubbish was piled high on the streets as waste collection workers went on strike
Finance minister Evangelos Venizelos, who has been meeting the inspectors in recent days, tried to strike a reassuring note today, ruling out any suggestion that Greece could be forced out of the shared currency. "Greece is and will always be a member of the euro zone, a member of the euro," he told a conference in Athens.
An uncontrolled Greek default on its debt would have unpredictable consequences, potentially unleashing a crisis which could destabilise the whole euro zone. But the severe cuts demanded by international lenders have caused deep resentment among ordinary Greeks.
Underlining the pressure on wage earners facing big cuts to their pay packets, monthly inflation data today showed a 3.1 per cent jump in consumer prices in September.
The European Union yesterday postponed a summit by a week to allow time for a broader solution to Greece's debt crisis. The leaders of Germany and France gave investors some hope on Sunday night by promising a plan soon to recapitalise Europe's banks but gave no details on what would be done.
The troika inspectors resumed their review of Greece's finances and reforms at the end of September, nearly four weeks after suspending talks over disagreements on the steps required to put the country's finances back on track.
Senior officials from the troika said last week they wanted more details on the impact of plans to slash the public sector workforce and increase taxes before concluding their review.
Agencies
