A Greek finance ministry official has said the country is close to an agreement with its international lenders to continue receiving bail-out funds.
This follows a conference call between Finance Minister Evangelos Venizelos and inspectors from the EU, IMF and ECB.
"Some work still needs to be done. We are close to an agreement," the official quoted by Reuters said, adding that some measures for this year and 2012 needed to be “quantified”.
Earlier, it emerged that EU and IMF inspectors expect a new Greek property tax to yield just half of the €2 billion targeted this year. This means new austerity measures may be needed to cover the shortfall.
Any additional austerity measures for 2011 are expected to be decided after the crucial conference call.
Mr Venizelos earlier promised to stick with his plan for the country to post a primary surplus in 2012. His target of generating more revenues next year than the country spends, before paying off interest on debts, comes despite the ongoing recession in the crisis-hit country.
Greece's economy is expected to contract by about 5.5% this year and to shrink further next.
Venizelos said the 2012 target was vital for Greece to avoid international "blackmail and humiliation" and came as markets continued to fret about the possibility of an imminent Greek default - stock markets around the world fell sharply today.
"We are living though a recession that is unprecedented in recent decades. The recession will reach 5.5% in 2011. It is the third straight year of recession and it will continue for a fourth, though significantly reduced," Venizelos said.
He said Greece planned to record a €3 billion primary surplus in 2012. That compares with a primary deficit of €24 billion in 2009. ''It is not rational or responsible to continue to increase the debt when our partners are helping us deal with the national debt," Venizelos said.
The Socialist government still must live up to its commitment to lower the 2011 budget deficit goal to 7.6% of gross domestic product. When it became obvious earlier this month that there was a more than €2 billion shortfall in the budget, Greece's creditors threatened to withhold the sixth installment of a €110 billion rescue package agreed upon in May 2010. Without the installment, worth €8 billion, Greece faces defaulting on its debts by mid-October.
A review by officials from the International Monetary Fund, the European Central Bank and the European Commission, collectively known as the 'troika,' was suspended earlier this month amid talk of missed targets.
The government hurriedly announced an extra property tax - to be levied this year and next and charged through electricity bills to make it easier to collect - in an attempt to raise enough to plug the gap. But the news was greeted with an outcry from a public already reeling from salary cuts and the recession.
State electricity company unionists also threatened to refuse to collect the taxes, and to prevent those who don't pay having their power supply cut off.
Venizelos said last night that the backlash led to scepticism among Greece's creditors about whether the government would manage to raise the projected revenue. The troika heads had been due to return to the country this week, but have stayed away and will hold the crucial teleconference with Venizelos later today instead.
"We expect the Greek authorities to explain, in particular, how they intend to close the fiscal gaps in 2011 and 2012 and how they plan to proceed with the structural reforms and privatisations," said Amadeu Altafaj Tardio, a spokesman for the European Commission.
"Depending on what they say, (the troika) will decide on the resumption" of the review mission," Altafaj Tardio said. Prime Minister George Papandreou, who cancelled a scheduled trip to Washington and New York on Saturday to remain in Athens for a "critical week," has also called a government meeting.
Despite record unemployment, Greeks have been slapped with emergency taxes this fall, further straining household budgets. Venizelos acknowledged that the new levies were "deeply unfair" but said the country had little choice.
IMF says Greece will remain in recession until 2012
IMF representative Bob Traa urged the government to speed up structural reforms and avoid further emergency taxes. "I have compared Greece to a Mercedes that can go 120km an hour but is only going 40km because it has so much sludge in the engine," Traa said.
He said Greece needed to speed up its reforms in tax collection and reducing the size of the overmanned public sector. Income tax and sales tax rates should not be reduced until those reforms succeed, he argued.
Traa said that that Greece's EU/IMF lenders have the goodwill to give the country more time for its economic adjustment programme in a weaker than expected economy, but it must stand by its commitments.
Traa said the debt-choked country had made a strong start on reforms but after municipal elections last autumn the spirit of pushing through reforms waned and this was feeding back into a weaker economy.
He also warned that Greece will remain in recession for all of 2012 with an annual contraction of 2.5%, and return to growth in 2013.
He told a conference organised by the Economist magazine that the Greek rescue programme is in a "difficult moment", gross domestic product was likely to contract by 5.5% in 2011 and "an average of -2.5% in 2012", with a return to growth in 2013.
