By Angelika Papamiltiadou

ATHENS (MNI) – Officials from the European Commission, the European
Central Bank and the International Monetary Fund will embark Monday on a
new round of inspections in Greece to measure the progress made on
implementing fiscal austerity measures agreed in exchange for the E110
billion emergency loan facility signed last May.

The second installment, worth E9 billion, has already been approved
and is expected to be disbursed tomorrow. The third installment should
be released in December.

Officials of the so-called “troika” will work with the Greek
Finance Ministry to draft measures for the 2011 budget and will push for
deregulation of the energy market and of closed professions, as well as
for speedier collection of data and the restructuring of indebted public
utility companies (DEKO).

European Commission sources said the officials will also push for
further cuts in public spending to offset the lower-than-expected
revenues reported by Greece so far. According to preliminary data
released by the Finance Ministry, net revenues rose 3.3% year-on-year in
the January through August period, far below the 13.7% annual target for
2010 set in the loan agreement.

The Commission is worried that the revenue target will not be met
and that therefore corrective measures, as stated in the agreement,
might be needed.

The Greek economy contracted by 3.7% y/y in the second quarter of
the year, more than expected, and there is concern that tax revenues
will remain below target.

Speaking at a press conference in Thessaloniki yesterday, Greek
prime minister George Papandreou said that no new austerity measures
will be implemented as long as “we do well,” but he did not exclude the
possibility of extending current measures in case revenues fall short.

“There are no new measures, only those we agreed in the loan
package of E110 billion,” Papandreou told reporters. “The revenue
slippage is around E1.5 billion. With the pace at which we are advancing
and with the measures we have already taken, we are confident that we
will reach the 2010 goal.”

The May loan agreement stipulates that in case the 2010 targets are
not met, the Greek government must extend tax hikes implemented in the
current measures, including on such items as tobacco, fuel and alcoholic
beverages.

Papandreou also rejected talk of restructuring Greece’s public
debt, saying it would be “catastrophic for the economy, for credibility
and for the country’s future.”

“We would be talking about the collapse of our banking system, it
would be a tragedy for households,” he said. “We are not even discussing
it.”

Papandreou defended the austerity measures imposed by the
government, which have resulted in drastic cuts to salaries, benefits
and pensions. “If all taxpayers paid their taxes, we would not have a
memorandum [requiring austerity], we would have lower tax rates,” he
said.

The prime minister noted that the year 2013 will mark the end of
the loan agreement, arguing that “the faster we implement the big
changes, the faster we will be able to exit the terms of the memorandum.
This could happen even before 2013 if all goes well.”

Asked to comment on the high spreads of Greek bonds, Papandreou
said there “is obviously fear in the markets and a crowd-like sentiment
and reaction.”

He added: “There is fear and risk relating to Greece, but we are
showing we are stronger and much more capable to deal with
problems…which will bring down the spreads.”

The premier did not announce any handouts to lower income
individuals or retirees as is traditionally done every year in the
Thessaloniki press-conference, where the annual agenda of the government
is unveiled. But he promised that, in an effort to boost market
liquidity, he would bring forward to 2011 from 2014 planned cuts in
retained earnings tax from 24% to 20%.

Papandreou added that he would ask the finance ministry to draft an
aid package for poor pensioners, “depending on how revenues go.”

–Angelika Papamiltiadou, a_papamiltiadou@hotmail.com

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