Gov’t to propose new bond issue to troika to cover funding gap

As the government comes under increasing pressure – from the political opposition and from its own ranks – to ease off on an ongoing austerity drive, Finance Ministry officials have reportedly proposed to troika representatives a way of covering an anticipated funding gap for next year of 4.4 billion euros in a bid to postpone talk about further measures.

According to the proposal as Kathimerini understands it, some 4.4 billion euros in bonds that were issued in 2009 as a capital boost for Greek banks and are to mature next May would be replaced by new bonds. Such a move would cover an estimated funding gap for next year and, Greek officials hope, would postpone until spring any discussion about the sustainability of Greece’s debt and the possible need for new austerity measures for 2015 and 2016.

Sources indicate that the proposal involving the new bonds is likely to meet with objections from the European Commission and European Central Bank – which together with the International Monetary Fund have granted Greece two rescue programs since 2010. Greek officials are said to be hopeful, however, that they can win round troika envoys who are due to return to Athens at the end of this month.

With local authority elections and European Parliament elections looming next May, Prime Minister Antonis Samaras is keen to avoid imposing any more pain on austerity-weary Greeks. He, and other government officials, are expected to impress upon troika auditors the risks of increasing taxes or cutting the incomes of Greeks as social and political tensions continue to rise.

But it remains unclear how open the envoys will be to offering any concessions as the government continues to lag in its implementation of structural reforms and in tax collection. The troika rejected last week’s appeal by Finance Ministry officials for a 15 percent reduction in the special consumption tax on heating oil and for an increase in the number of heating allowances.

The initiative divided the ministry itself with reports that Finance Ministry Yannis Stournaras had not sanctioned the proposal and that his deputy Christos Staikouras had received the go-ahead from Samaras. The rumors, though rebuffed by the ministry, have fuelled speculation of Stournaras’s possible departure ahead of next year’s local authority elections.

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