Greece resumes talks with European lenders amid anger over austerity

Almost four years after Athens’s debt crisis exploded – forcing EU mandarins to rewrite the book of fiscal rules – mistrust, anger and thinly disguised panic have returned to strain Greece’s relations with its lenders at the EU, European Central Bank (ECB) and International Monetary Fund (IMF).

“They are pressing us to adopt policies that are crazy,” confided a senior government official as the finance minister, Yannis Stournaras, relaunched “intensive negotiations” with creditors over a looming budget black hole. “If we are forced to implement so much as half a measure more there will be a revolution in this country. Are they blind?”

In Brussels, another spokesman said: “It’s bad. It’s as if we are back in 2010 again.”

Prime minister Antonis Samaras’s fragile coalition now faces what insiders are calling its toughest month since assuming power in June 2012. With a wafer-thin majority, and an increasingly hostile anti-austerity opposition, the government must pass an array of highly controversial bills, starting with next year’s budget, to be presented to parliament on Thursday.

Votes on a new property tax – which will see farmers being faced with a levy on landholdings for the first time – and on lifting a ban on home foreclosures are also lined up. Visiting inspectors say abolishing the repossessions amnesty, which expires on 31 December, is crucial to rejuvenating the cash flow of banks and the moribund Greek property market.

Barely 10 days after narrowly surviving a no-confidence motion, it is far from sure that ruling MPs will vote the measures through. But it is the prospect of yet more spending cuts – in the form of reduced wages and pensions and increased taxes – that has unnerved Greek officials most.

Relentless rounds of belt-tightening, the price of rescue funds worth €240bn (£200bn) since the outbreak of the crisis, has resulted in the disposable income of Greeks being slashed by 40%, according to Samaras, who has resolutely refused to adopt more measures.

With the country having suffered a 25% slide in GDP – after pulling off the biggest postwar fiscal adjustment in western history – his deputy, the socialist leader Evangelos Venizelos, last week went further, insisting that Greece had now reached “breaking point”.

The human cost of reducing the budget deficit from 15.9% to around 3% of GDP this year had not only produced record levels of unemployment (at 27.2% the highest in the EU), but thrown Greece into prolonged recession, he said. “Our foreign friends have to understand that there can be no more measures.”

Economists, even those who have criticised the government for not moving fast enough with reforms, say further cuts could risk wrecking the fiscal progress the nation has made so far.

“There is no way the economy can stabilise if they keep pushing us to cut more and more,” said Prof Gikas Hardouvelis, who was in charge of economic policy under the previous, technocratic government. “In my view, the economy is about to stabilise and it could easily be undone if they keep insisting on more measures,” he added. “To maximize the possibility of lenders getting their money back and to guarantee stability and subsequent growth I firmly believe we need another loan of about €12bn.”

Another senior government aide highlighting mounting fears of political instability said: “What the troika [of lenders] don’t seem to believe, or understand, is that the government will fall if pushed too far,” said one. “At this point, after achieving so much, we deserve a bit more respect.”

But with the troika still at odds with the government over the extent of the shortfall – both the EU and IMF claim it will be near €3bn – the standoff over how to fix the fiscal gap is expected to continue into 2014.

“Four years into the crisis we are still being haunted by the same problems,” said the analyst, Giorgos Kyrtsos, adding that Greece’s debt-to-GDP level would reach about 179% this year compared with 120% when the country received its first bailout in May 2010. “It’s déjà vu all over again,” he said, “although this time with far less Greek drama because the rest of southern Europe has basically been stabilised. Greece remains the odd man out.”

Source: http://www.theguardian.com/world/2013/nov/18/greece-troika-lenders-anger-over-austerity