The IMF highlighted the country’s woes in a detailed report that found its economy would contract more than previously predicted, leading to a jump in government debts to more than 170% of national income.
Fitch, the credit-rating agency, gave a clear signal that it believes Greece is heading closer to default after it followed the report with a downgrade of the country further into junk territory. The government responded by describing the downgrade as “bewildering”.
The IMF, which was co-sponsor with the EU of a €110bn (£95bn) bailout of Greece last year, said gross domestic product would shrink by 3.8% this year, compared with the 3% predicted in its previous review, owing to the country’s worse than expected recession.
“For the programme to succeed, it is essential that the authorities implement their fiscal and privatisation agenda in a timely and determined manner,” said the Washington-based body, which is now headed by the former French finance minister Christine Lagarde.
“The debt dynamics show little scope for deviation,” it said.
The news came as Evangelos Venizelos, the Greek finance minister, attempted to allay fears of further foot-dragging in the huge task of jump-starting the faltering Greek economy by outlining the socialist government’s privatisation plans ahead of a possible EU summit.
Greece, which is surviving on cash injections from the European Unionand IMF after narrowly avoiding a debt default earlier this month, has promised to raise €1.3bn by the end of September as part of a punishing new round of austerity measures. Venizelos has signalled that he will press EU member states to encourage investors to participate in the scheme.
On Tuesday the finance minister, who detailed the drive in a letter to eurozone leaders, said he hoped the EU would wrap up negotiations over a second rescue package of emergency loans – now deemed expedient if Athens is to stave off economic collapse – by the end of August, before it receives its next tranche of emergency aid on 15 September.
Despite all this financial support, the country remains locked out of capital markets, leaving it unable to borrow in order to service its colossal €355bn debt. “The overall programme … must be completed by the end of August,” Venizelos said.
For the first time he suggested Athens would be prepared to put up collateral, in the form of public property, for more loans if the next package of emergency aid made Greece’s runaway debt more sustainable.
“We, Greece, are ready to enter a new programme … we also want full coverage, not just for the country’s fiscal requirements but for the stability of Greece’s financial and banking system,” he said.
However, ministers doubt a planned programme of privatisations would be successful. “I predict, and you will see that I will be right, that not everything earmarked for privatisation will be sold, but much less [will go]. It’s simply not possible to sell everything,” the deputy finance minister, Pantelis Economou, told the Greek parliament.
George Papandreou, the prime minister, added to the row by dispatching an excoriating letter to Jean-Claude Juncker, the eurozone’s chairman, slamming the EU for its lack of leadership in dealing with the debt crisis.
“I am now convinced, after 14 months, that no matter what Greece does – and we have proven ready to live up to our responsibilities – if Europedoes not make the right, collective, forceful decisions now, we risk new, and possibly global, market calamities due to a contagion of doubt that could engulf our common union,” he said. “Strong and visionary European leadership is needed.”
- All that the Greeks did was to spend the money the voodoo economists gave them to keep the Capital Project afloat. Now it’s they who have to pay (ikners.com)
- Greece seeking new bailout deal by late August (seattletimes.nwsource.com)
- More Voodoo Rhythm Economics (ikners.com)
- Greece seeking new bailout deal by late August (seattlepi.com)
- Is it all just Greek to you? (ikners.com)
- The love life of banks, how much they care and how much they think about the masses. We get to see it all in Greece (ikners.com)
- Greece given ultimatum as fears rise of euro plague (alternet.org)
- Greece’s Finance Minister Evangelos Venizelos speaks on the economy: highlights (telegraph.co.uk)
- New bailout blueprint for Greece doubles cost to taxpayers, reports The Guardian (birdflu666.wordpress.com)