Troika keeps Greece hanging on for loan

Greece will have to wait until later this month or even next month, after top officials from the European Commission, European Central Bank and International Monetary Fund have returned to Athens, to find out if it has done enough to secure an 8-billion-euro loan installment that would stave off default.

Finance Minister Evangelos Venizelos held a second teleconference with the troika representatives on Tuesday night to discuss the measures that the government can adopt straight away to reduce its deficit. A brief statement after the talks said that the two sides had reached an agreement that paves the way for the troika officials to come to Athens next week.

Prime Minister George Papandreou is due to chair a cabinet meeting this morning to discuss the steps that were set out during the teleconferences on Monday and Tuesday. These included public sector sackings, reductions to pensions, civil servants? salary cuts and some tax hikes.

Sources indicated that the measures likely to be adopted include at least 25,000 sackings in the public sector with another 70,000 civil servants being placed on labor reserve, where they will receive reduced wages for a limited time before being laid off.

Public servants? salaries are likely to be cut by up to 50 percent, while state pensions are due to be capped at under 1,700 euros per month.

The government is also thought to have agreed to equalize heating oil tax with the levy on diesel fuel, which will lead to the price of the former rising by 40 cents per liter.

There were also discussions between Venizelos and the troika about reducing the tax-free threshold for incomes. Currently at 8,000 euros, the ceiling could be brought down as far as 4,000 euros. Combined with other measures, the adjustments are designed to save at least 1 billion euros this year and 6.5 billion in 2012.

Earlier, deputy government spokesman Angelos Tolkas said that PASOK?s priority would be to reduce costs in the public sector. ?Our primary target is to shrink the state,? he said. ?The state budget had stopped paying the wages of about 200,000 civil servants over the past two years and we will continue with this.?

Meanwhile, credit ratings agency Fitch cast doubt on whether further austerity measures would help Greece avoid default. Fitch said that it foresees a Greek default but that the country would not leave the eurozone.

?Concerns over the risk of a breakup of the eurozone are greatly exaggerated,? said David Riles, head of global sovereign ratings at Fitch.

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