Greek starts new review of stability program

The heads of troika inspectors returned to Athens on Monday for a new review of Greece's fiscal consolidation and reform program ahead of the release of the next bailout aid to the country and after International Monetary Fund's report last week which admitted failures in estimations in the first bailout in 2010. The chief auditors of IMF, European Commission and European Central Bank lenders who keep the country afloat with multi-billion loans in return for austerity and reform measures, held a first meeting over the image of Greece's economy in the first half of 2013 with Greek Finance Minister Yannis Stournaras. They are to hold talks with other Greek government officials over the next days, before attending on Thursday a Euro Working Group meeting which is expected to clear the next 3.3 billion euro (4.3 billion U.S. dollars) aid installment. During Monday's talks, according to Greek Finance Ministry sources, the two sides discussed all issues on the agenda, including the reduction of VAT rates at food catering from the current 23 percent to 13 percent on a pilot basis for the next six months. Athens insists on the change recently, arguing that such a reduction would strengthen consumption and ease recession, while troika experts express concern over the impact on revenues collection targets and seem willing to discuss only a pilot scheme. Greek officials argue that revenues goals will be met easily through increased demand in particular during this summer's tourism season. Other key topics discussed with troika representatives on Monday, according to sources and local media reports, were the progress of reforms, with focus on the overhaul of the public sector and the mass dismissals of civil servants agreed with creditors this spring, the tax reform, the privatization program, and the possible fiscal gap for 2014-2016. Regarding the thorny issue of layoffs, Greece has promised to fire some 4,000 public servants this year, including 2,000 this summer, but there have been delays in the selection of employees to be made redundant, as it has happened with lags in other parts of the program under review. Greek officials appear optimistic that the new round of talks with inspectors will finish without major headaches compared to past reviews, as several key preconditions for the release of the next bailout tranche are on track to be settled. For instance, a bill introducing some breathing space on indebted austerity- suffering households is expected to be ratified by the parliament later on Monday evening or early Tuesday. Athens hopes that the review will have been wrapped up by the next Eurogroup meeting on June 21 which will discuss reforms concerning the European banking sector. Greece hopes that these reforms could open the road to a retroactive recapitalization of Greek banks through the European Stability Mechanism, leading to a further reduction of its sovereign debt by 50 billion euros. Athens has said it is in its intentions to seek a further debt restructuring, an idea supported by IMF in its latest report, but opposed by European partners for the near future. Greek officials and experts feel that IMF's admission that the impact of tough austerity imposed on Greeks was underestimated strengthens the case for a further relief to overcome the crisis, make the debt burden sustainable and support development to reverse deep recession. According to estimates of the Greek Centre of Planning and Economic Research published on Monday, the wrong estimates in the first bailout over the extent of recession cost Greeks approximately 9 billion euros in three years. According to the initial forecasts, Greece today would post a positive 2.2 percent growth. However, the Greek GDP shrank by 6 percent in 2012 for a fifth straight year and is estimated to shrink by at least 4.2 percent this year, before recovery starts in 2014, as forecast today by Greek and international officials. (1 euro=1.32 U.S. dollars)