Greece set to miss public sector reform goals - official

Wednesday 03 July 2013 12.17
Athens has already missed a June deadline to place 12,500 state workers into a "mobility scheme"
Athens has already missed a June deadline to place 12,500 state workers into a "mobility scheme"

Greece can not meet targets on reforming its public sector but expects to reach agreement with its foreign lenders on all other issues by Monday's Eurogroup meeting, finance ministry officials said today.

Greece's EU and IMF lenders are unhappy with the progress it has made in reforming its bloated public sector.

They have given Athens a three-day ultimatum to convince them by Friday that it can deliver on its promises before unlocking €8.1 billion in aid.

Athens has already missed a June deadline to place 12,500 state workers into a "mobility scheme", under which they are transferred or laid off within a year, and officials said it would not be able to strike a deal on it by Monday.

''There is no chance that we will satisfy the current demands as they are set out," a senior finance ministry official said.

Athens needs to conclude talks with its lenders by the middle of the month to ensure it receives the latest aid tranche, which it needs to redeem about €2.2 billion of bonds in August.

Officials sought to play down fears of what would happen if Greece did not receive aid payments in time, saying in a "worst-case scenario" it could compensate by issuing additional treasury bills.

Finance Minister Yannis Stournaras was due to hold a third round of talks in as many days with inspectors from the "troika" of EU, IMF and ECB lenders later this afternoon.

To pressure Athens to deliver on reforms without creating a full-blown crisis, its lenders might refuse to pay the full sum in one go and break it up into monthly payments instead.

Public sector layoffs are an incendiary issue in Greece, which is struggling through a sixth year of recession, record high unemployment and sinking living standards.

Delays in pushing ahead with the hugely unpopular reforms has become a thorny issue in talks with the troika, which returned on Monday after a two-week break during which Prime Minister Antonis Samaras lost an ally in his ruling coalition and reshuffled his cabinet.

Kyriakos Mitsotakis, the newly-appointed administrative reform minister tasked with making the civil service smaller and more efficient, said he needed "several months" to get the scheme right. "Clearly this cannot happen in a few days or a few weeks," Mitsotakis told Skai TV last night.

He proposed compensating for the shortfall by speeding up firings of civil servants who have been found to have broken the law or those who were hired under false credentials.

Other sticking points in Athens's negotiations with its lenders include an unpopular property tax and a possible reduction in a sales tax for restaurants. The government also plans to ask its creditors to lower this year's privatisation target of €2.6 billion after failing to find a buyer for natural gas company DEPA.

But officials were hopeful of a positive outcome at Monday's Eurogroup meeting. "A favourable assessment of Greece at Monday's Eurogroup is to everyone's benefit," the finance ministry official said.