A hardening in the stance of the International Monetary Fund and its representative in the troika, Poul Thomsen, appears to have been behind the Greek government’s inability to reach an agreement with its lenders over a package of 11.5 billion euros in cuts and another 2 billion euros in tax hikes.
The troika, which includes the European Central Bank and the European Commission, ended talks with the coalition on Friday and its representatives are due back in Athens by next Tuesday at the latest. Following negotiations with Finance Minister Yannis Stournaras on Friday, about a third of the 13.5 billion euros in measures remained to be agreed between the two sides.
Government sources said that Thomsen had raised objections to the coalition’s proposals throughout the week and had persisted with the need for further cuts to wages and pensions in order to complete the package. Amid tense exchanges between Stournaras and Thomsen, the IMF official is said to have been unmoved by the finance minister’s concerns about the survival of the three-party government should the cuts be deeper than expected.
Sources said the government believes that by either endangering a deal or by getting Greece to agree to measures it will not be able to implement, the IMF hopes that it will be able to highlight in the troika report on the Greek adjustment program the need for a second debt restructuring.
The government still hopes that it will be able to seal the package of measures in time for them to be voted through Parliament before the Eurogroup meeting on October 8 and in time for Prime Minister Antonis Samaras to be in a stronger position ahead of negotiations at the European Union leaders’ summit on October 18.
By the time the troika returns to Athens, Greece must be in a position to quell the inspectors’ doubts about 2 billion euros worth of savings that are due to be produced through public administration reforms. The lenders are also expecting more detailed plans about the tax measures that will raise 2 billion euros over the next two years.
The two sides will also have to agree on how the cuts will be spread over the next two years. The troika is demanding that 10 billion euros be saved next year and 1.5 billion in 2014. This would put into doubt Greece’s call for an extra two years to apply the measures.