Greece said Wednesday that a loan agreement it is
negotiating with its creditors would give the country an additional two years
to meet its budget targets in exchange for deep budget cuts and other measures.
Senior euro-zone officials, however, said no deal has
been reached and no extension has been granted because a report by
representatives of the country's creditors on Greece's progress on repairing
its economy wasn't ready. Greece's creditors, the euro zone and the
International Monetary Fund, are still at odds over how to come up with as much
as €20 billion ($26 billion) necessary to finance the delay.
But a draft of the loan agreement indicated Greece
would be given extra time. Under the terms of that draft, being negotiated by
the Greek government and a delegation of inspectors from the so-called
troika—the European Commission, the IMF and the European Central Bank—Greece
would have until the end of 2016 to meet a targeted budget surplus of 4.5%,
before taking into account interest payments on the national debt
The document says the
extension would be prompted by a much deeper-than-expected recession that has
crushed the Greek economy and sent unemployment and business bankruptcies
soaring to record levels. The extension hasn't been approved by Greece's
creditors from fellow euro-zone countries and the IMF,
In a string of comments, the European Central Bank and
German government officials stressed that no agreement had been reached and
that any decision on Greece's bailout would be taken after the troika's
inspectors had finalized their report.
"There is no new information," German
Finance Minister Wolfgang Schäuble told a news conference, when asked if he
could confirm that an extension of the deadline had been granted. "I
cannot confirm that."
ECB President Mario Draghi
told German lawmakers there was no recommendation yet from the troika committee
of experts about the status of Greece's economic reform.
Mr. Draghi and Mr. Schäuble
joined other German and ECB officials who earlier denied related reports.
German government spokesman Steffen Seibert said earlier Wednesday that the
government sees no basis for a debate on the extension.
Addressing the Greek
Parliament on Wednesday, Finance Minister Yannis Stournaras said negotiations
on a €13.5 billion package of austerity measures had taken into account a
two-year extension of the program. Without the extra time, Greece would have to
take austerity measures valued at €18 billion over the next two years to bring
its budget targets back on track, Mr. Stournaras said.
"Today, what have we
achieved? We have achieved the loan extension," he told lawmakers.
Greece has been pushing for
softer bailout terms in a bid to minimize the impact of tax increases and
spending cuts on the economy. The moves are needed to clinch further financial
aid. Greece's economy, now in its fifth year of contraction, is expected to
shrink by more than 6% this year and by 4.5% next year, the draft document
shows, before staging a mild quarter-to-quarter recovery from 2014.
The revised primary
targets—excluding debt servicing costs—involve a deficit of 1.5% of gross
domestic product in 2012, and an evenly paced improvement in the primary
balance thereafter—by 1.5% of GDP each year to 2016, the document says.
Taking an extra two years to
meet those targets "will limit the negative growth impacts in 2013-14,
when the economy needs to find a firmer footing, while still preserving a good
adjustment pace," the draft states.
A decision on that
extension—and more important how to finance it—will be made with euro-zone
finance ministers who are expected to decide next month whether to disburse a
€31 billion aid installment under an existing €173 billion bailout agreed to
earlier this year.
Still, the draft document,
which includes many blanks and bracketed estimates, lays out the dozens of
reforms and fiscal measures Greece must take over the next two-to-four years to
continue qualifying for further loans. These include approval of the €13.5
billion package of spending cuts and tax measures, and moves to step up the
country's moribund privatization program and to overhaul its dysfunctional tax
system and tax code.
The bulk of the austerity
measures will be undertaken in 2013, with €9.2 billion earmarked for that year,
according to the draft. The retirement age for Greece would also be raised to
67 from 65 currently.
One of the most controversial
measures includes placing up to 25,000 public-sector workers on a special labor
reserve, which is widely seen as a step toward their dismissal. Some 5,000
workers are to be transferred to the labor reserve in each quarter of 2013,
according to the draft.
Privatization targets, where
Greece recently aimed to raise some €19 billion by 2016, would be scaled back
even further to about €10 billion through 2016 and €25 billion through 2020.
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