By ALKMAN GRANITSAS, Wall Street Journal
ATHENS—Greece’s newly elected government is seeking billions of euros of additional budget cuts—and looks poised to announce the first steps toward streamlining the country’s bloated public sector—ahead of the return of a troika of international inspectors to Athens this week.
The visit by the inspectors from the European Commission, the International Monetary Fund and the European Central Bank—set to start Tuesday—will begin the first formal appraisal of Greece’s delayed overhauls since closely fought June 17 elections brought a fragile three-way coalition government to power.
After back-to-back elections in May and June threw Greece’s overhauls further off course, the coalition—made up of the conservative New Democracy, socialist Pasok and small Democratic Left parties—now faces the difficult task of convincing skeptical lenders that it is serious about implementing those measures. But without a green light from the troika, Athens risks being cut off from badly needed aid and could run out of cash as early as August. It has sought emergency funding from Europe to cover a looming bond redemption in late August.
The government is expected to announce this week the merger and closure of some 20 state agencies—for example, merging two state-owned trade-fair organizers with Greece’s export-promotion agency—the first wave of some 200 organizations it promises to streamline by the end of August. It has identified roughly two-thirds of some €11.5 billion ($14 billion) of budget cuts Greece must make over the next two years to meet the terms of its latest European-led €173 billion bailout.
“We are proceeding with the mergers in the public sector and we are going to find all of the cutbacks demanded, or in some cases propose equivalent measures worth more than twice what the troika is asking,” said a senior Greek government official.
But it looks doubtful that the troika—which is expected to arrive in Athens with a laundry list of more than 200 delays in overhauls—will be convinced. Troika officials have hinted that they may ask for cutbacks over and above those the government penciled in for 2013 and 2014, to cover a €2 billion budget hole this year.
It has also taken a dim view of the coalition government’s pledge to eschew any public-sector layoffs by transferring—rather than laying off—workers at the state agencies slated for closure. Under the latest bailout program, Greece has committed to shedding some 15,000 public workers by the end of this year.
Greece’s previous promises to close unnecessary state bodies have fallen short of the troika’s expectations. To date, the Greek government has only managed to close about a dozen public agencies out of a more than 120 candidates. And past efforts to reposition public workers has been ad hoc at best. Among the notable failures has been to place unemployed national rail workers at state museums, and aviation engineers from the former state airline in Athens’ public-transportation system.
But the bigger challenge may lie in the weeks after the troika’s visit—which is expected to conclude by mid-August. After campaigning on a promise to renegotiate the terms of the bailout that he blames for deepening Greece’s five-year-long recession, Prime Minister Antonis Samaras is expected to make his case to other European leaders for a two-year extension in the country’s budget-deficit targets during a planned visit to Brussels, Berlin and Paris in late August.
“The next step now is to deal with the troika and to deal with them correctly,” said the official. “After that, the prime minister will have to go see the other European leaders at the end of August and make sure they know that something has changed in Greece; that the national psychology has changed.”
In remarks to Bill Clinton Sunday, Mr. Samaras told the former U.S. president—who was visiting Athens to drum up support for investments in the country—that Greece was stumbling though “our version of the Great Depression.”
But any extension to Greece’s deficit targets—to 2016—could cost European taxpayers an extra €30 billion to €50 billion, according to Greek and German news reports Sunday, something that will likely meet with a frosty reception abroad. In a television interview Sunday, German Economy Minister Philipp Rösler said he had “great skepticism” that Greece would be able to fulfill its commitments under the bailout program and warned that if it failed, Athens should receive no further aid.
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