* Euro zone ministers confer on how to keep Greece afloat
* Greece slashes forecast of 2013 primary budget surplus
* EU official say debt write-off not under discussion
* Other ways of stretching out loans eyed
By Jan Strupczewski and George Georgiopoulos
BRUSSELS/ATHENS, Oct 31 (Reuters) – Greece revealed on
Wednesday that it will overshoot its deficit and debt targets
again next year because of a deeper than forecast recession as
euro zone finance ministers debated how to keep the
near-bankrupt state afloat.
Athens needs to push through spending cuts and tax measures
worth 13.5 billion euros ($17.5 billion) as well as a raft of
economic reforms to satisfy EU and IMF lenders and secure more
bailout money next month to avoid bankruptcy.
Parliament in Athens took a step forward by narrowly passing
a required privatisation measure, but the precariousness of the
government’s majority fuelled doubts about the passage of other
more contentious reforms next week.
After a two-hour conference call of ministers from the
17-nation Eurogroup, German Finance Minister Wolfgang Schaeuble
told a news conference: “There was considerable progress.”
However, another person on the call said there was no real
progress because the International Monetary Fund remained at
loggerheads with Germany, the EU’s biggest creditor nation, on
the need for European government lenders to participate in
reducing Greece’s debt burden.
“There is a harsh debate between the IMF and Germany about
OSI (official sector involvement),” said the participant, who
spoke on condition anonymity.
The IMF also opposed pressure from Berlin to make Greece put
aid tranches and earmarked tax revenue into an escrow account to
service its debts, and for automatic measures to kick in if its
adjustment programme veered off course again, the source said.
Eurogroup chairman Jean-Claude Juncker said in a statement
he expected a deal at the finance ministers’ face-to-face
meeting on Nov. 12 provided Greek authorities had completed a
list of prior actions.
Schaeuble said ministers expected to receive a crucial
report from the so-called “troika” of international lenders on
Nov. 11 or 12, near the deadline, but insisted: “Time pressure
cannot lead to irresponsible solutions.”
The German minister also said there were no concrete
negotiations yet with Cyprus, which has said it may struggle to
pay public sector salaries in December without aid, and they
would probably not start until 2013.
The ministers received more bad news earlier when Athens
slashed its forecast for a budget surplus before debt servicing
costs next year, dimming one of its few bright spots as rounds
of austerity deepen a recession already into its fifth year.
The government forecast a 4.5 percent economic contraction
in 2013, which will push public debt to a record 189.1 percent
of gross domestic product. The primary budget surplus is
forecast to be just 0.4 percent, well down on the 1.1 percent
pencilled in previously.
Thomas Wieser, the coordinator of euro zone finance
ministers, said Greece’s lenders were not discussing at present
another debt write-off, or “haircut”. EU diplomats said other
ways of stretching out official loans were on the table.
The options included lengthening the maturities and reducing
the interest rate on existing loans, an interest payment
holiday, letting Greece buy back its own debt at a discount with
borrowed money and allowing it to issue more short-term T-bills.
Even though IMF and EU officials say privately Greece’s debt
is unsustainable and will have to be restructured, Schaeuble
said that for a large majority of euro zone countries accepting
a “haircut” was legally impossible.
The troika is readying a debt sustainability analysis and
pondering ways to plug a financing gap if Greece were to reach a
primary surplus, which excludes interest payments, of 4.5
percent of GDP in 2016 rather than in 2014.
The source said the ministers were told the troika reckoned
that Greece would need an extra 30 billion euros ($39 billion)
in funding over the two extra years.
Wieser said it would be “very, very tough” for Greece to
reach the original target, given the depth of its recession, a
view underscored by Wednesday’s revised forecast.
The latest budget figures nonetheless confirm the country is
on track to achieve a primary surplus for the first time since
2002, after a 1.5 percent deficit in 2012.
PASOK BACKS REFORMS
A deal on restarting the second bailout for Greece, stopped
in June because the country was off track with reforms, hinges
on the ruling coalition adopting strict labour market reforms.
An overwhelming majority of Socialist lawmakers agreed on
Tuesday to vote in favour of the contested reforms, party
officials told Reuters, sharply increasing the likelihood of the
government winning a parliamentary vote which has become its
biggest test since taking power in June.
After months of negotiations on the austerity plan, Prime
Minister Antonis Samaras announced that talks had been completed
and implored his allies to back the package, which includes
scrapping automatic wage rises and cutting severance payments.
The prime minister’s New Democracy party and the Socialist
PASOK have between them 160 deputies, nine more than they need
for an absolute majority in parliament.
But the third party in the coalition, Democratic Left,
refuses to back the proposed new labour laws, making next week’s
vote unpredictable. The privatisation measure passed by just 149
votes to 139 on Wednesday.
“What would happen if the deal isn’t passed and the country
is led to chaos?” Samaras said in a statement. “Such dangers
must be avoided. That is the responsibility of each party and
every lawmaker individually.”
MOVING TARGETS
The government included a large chunk of the austerity
measures in the 2013 budget bill presented on Wednesday, with
the remaining measures and labour reforms in a separate bill to
be put to parliament on Monday.
Raising the pressure, Greece’s two biggest labour unions
called a 48-hour strike for Nov. 6-7 to protest against the
latest wave of austerity measures.
Highlighting persistent trouble in meeting its targets, the
country’s privatisation agency said on Tuesday it had slashed
its revenue target to about 11 billion euros by the end of 2016,
down from a previous target of about 19 billion euros by the end
of 2015.
The lack of progress stems from the reluctance of Greek
governments to sell off assets, political instability and the
lack of investor interest in a country facing a grim economic
future and the threat of an exit from the euro.
Despite public anger at the unpopular austerity measures,
the budget is expected to pass in parliament since all three
parties in the ruling coalition have agreed to back it.
