Greece starts key talks with debt inspectors

By Nicholas Paphitis, AP

ATHENS — International debt inspectors started new talks Thursday with the Greek government that will determine whether the country keeps receiving vital rescue loans or is forced to default and potentially leave the common European currency union.

The heads of an inspection team from the European Union, the International Monetary Fund and the European Central Bank met for more than two hours with Finance Minister Yannis Stournaras.

A senior ministry official said that “both sides are well-disposed to find the best possible solutions.” The official, who spoke only on condition of anonymity, said the government has identified proposed spending cuts for the next two years and would present them to the inspectors “very likely within the day.”

Later Thursday, European Commission President Jose Manuel Barroso will hold talks with Prime Minister Antonis Samaras during his first official visit to Athens since mid-2009, when Greece’s acute financial crisis broke out.

Talks with the EU, IMF and ECB inspectors — commonly known as the troika — are focusing on the progress of a program of stringent spending cuts and other austerity measures imposed on Greece as a condition for two international bailouts keeping the country solvent.

More importantly, Greek officials must also convincingly outline how they will save an additional 11.5 billion euros (US$14 billion) in 2013 and 2014, while boosting revenues by 3 billion euros (US$3.6 billion) to reduce the country’s bulging budget deficit. Although the details have not been released, new cuts in public outlays are expected to affect pensions and civil service salaries as well as the health and welfare sectors.

The finance ministry official said no new cuts have been requested for this year.

“(The troika officials) were clear to us that they want us to implement what (Athens) committed in March to do,” he said. “They never spoke of new measures … for 2012.”

He added that Athens insists on the need for a more generous deadline to implement the measures. “We always raise the question of an extension, and did so today, too,” he said.

The bulk of the new cuts — worth an estimated 5 billion euros — will be borne by the Labor, Social Security and Welfare Ministry. Minister Yiannis Vroutsis, who will meet troika inspectors next week, has pledged that the cuts will be implemented “as fairly as possible.”

Health spending will be reduced by some 600 million euros, partly through department mergers and development of ministry assets.