Greece talks are 'satisfactory'

Greece's Finance ministry said "satisfactory progress" was made in a conference call with the country's international lenders…

Greece's Finance ministry said "satisfactory progress" was made in a conference call with the country's international lenders this evening.

Senior EU/IMF/ECB inspectors are also expected in Athens next week.

"Satisfactory progress was made," the ministry said in a statement. "The talks will continue this coming weekend in Washington DC, where finance minister Evangelos Venizelos is going to attend the annual meeting of the International Monetary Fund."

The ministry said technical teams would continue to work on 2011-12 budget data as well as the whole mid-term plan up to 2014.

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Earlier, Greece promised further cuts to its bloated public sector.

Anger over austerity among ordinary Greeks is matched by bail-out fatigue among north European creditor countries, especially Germany, Finland and the Netherlands, which are taking the toughest line on strict conditions for more money.

Greece has come under intensive pressure from its bailout lenders to bring forward a drastic round of public sector job cuts as US president Barack Obama held talks on Europe’s expanding debt crisis with German chancellor Angela Merkel.

In a statement late last night, the White House said Mr Obama and Dr Merkel agreed that “concerted action” would be needed in the coming months to address the situation in the euro zone.

Protests in Greece against cuts have dwindled since early this year when the Greek capital saw bloody clashes between police and rioters, but frustrations are growing again as the crisis worsens.

"They have crippled us," said 44-year-old public sector employee Niki Playannakou, also a single mother.

"We accepted the cuts last year, we put up with some things for the sake of the country. But as time goes by we don't see things improving. How much can a family take?"

Greek government officials said a first call yesterday had been "productive and substantive" and they expected to clinch the release of an €8 billion aid tranche despite consistently missing the targets of its bailout deal.

The European Union and International Monetary Fund are losing patience and increasing pressure on Athens to deliver on pledges to slash its deficit even as the economy heads towards a fourth year of recession.

"Our primary target is to shrink the state," deputy government spokesman Angelos Tolkas said on NET radio. "The Greek state budget has stopped paying the wages of some 200,000 civil servants in the last two years. And we are continuing."

The IMF has told Athens to cut the public sector workforce and payroll, shut inefficient state entities and fight tax evasion. The government has cut public sector pay and pensions but so far balked at sacking more civil servants, a key component of the governing Socialist party's electorate.

Mr Venizelos has pledged to take on as much austerity as needed to avoid a default that would be likely to trigger deeper turmoil on already shaky global markets and push other indebted countries in the euro zone periphery closer to the brink.

Officials close to the so-called troika of the EU, IMF and European Central Bank said Greece still had work to do before today's call, including fleshing out details of how to prevent slippage from next year's budget deficit target of 6.5 per cent of annual output.

Demand was strong at the Greek debt agency's auction of €1.25 billion of 3-month treasury bills, but the yield rose to 4.56 per cent. The short-term debt market is Greece's sole source of market funding and is seen as a barometer of foreign sentiment.

Athens also denied a report that it was considering holding a referendum on the country's membership in the euro zone.

Citing unnamed sources, Kathimerini daily wrote that prime minister George Papandreou was mulling a plebiscite on whether Greece should continue to tackle its debt crisis within the single currency or outside of it.

The government has long said it was planning a referendum this autumn on political reforms but has repeatedly denied it would concern the country's euro membership.

Asked if the referendum would be about staying in the euro zone, deputy government spokesman Mr Tolkas said: "No. We haven't discussed such an issue, definitely not." He said the government had put a bill to parliament yesterday aimed at allowing the country to hold referenda but without specifying any issue.

Ratings agency Fitch criticised a failure by euro zone leaders to deal with the crisis and said an aura of ambivalence to Greece staying in the bloc had raised doubts over the political commitment to the single currency.

It said however: "Fitch expects Greece to default but not leave the euro zone."

Arthur Beesley

Arthur Beesley

Arthur Beesley is Current Affairs Editor of The Irish Times