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Creditors arrive in Greece for crucial inspection

July 24, 2012 |  7:40 am

Antonis-samarasThis post has been updated. See the notes below for details.

ATHENS -- With doubts flaring anew over Europe's ability to  solve its deepening debt and currency crisis, Greece’s international creditors returned to Athens on Tuesday for an inspection that could determine if the near-bankrupt nation remains within the shared European currency.

Recession-ravaged Greece is being kept afloat by emergency loans from its European peers and the International Monetary Fund. Two bailout packages worth a total of about $300 billion have come with strict conditions that the country drastically overhaul the economy, sell state monopolies and slash excessive public spending, including about 150,000 jobs from the bloated state sector.

Officials from the IMF, the European Commission and the European Central Bank — together known as the troika — have warned Athens that bailout funds would be cut off if Greece's newly elected government did not deliver on lagging reforms.

“The Greek authorities are very much aware of the need to catch up the lost time and of the urgency of acute action to deal with the challenge that the country faces,” European Commission spokesman Antoine Colombani said ahead of the visit, which follows a courtesy call the troika paid just after the government was installed.

[Updated 11:35 a.m., July 24: European Commission President Jose Manuel Barroso is also due for high-level talks in Athens on Thursday, the first such visit by the European Union’s executive chief since the Greek crisis surfaced in 2009.]

On Monday, the value of companies listed on the Athens Stock Exchange plunged by about $1.8 billion as investor fears over Europe’s debt crisis intensified. Markets are losing confidence in financially ailing Spain, the fourth-largest economy in the 17-nation Eurozone, and speculation is surging that Athens will not be able to deliver on its austerity pledges.

Greece’s month-old, conservative-led coalition hopes to win over skeptical investors with pledges to jump-start the economy with a massive push in privatizations and quick closure of money-losing state organizations.

[Updated 11:35 a.m. July 24: On Tuesday, Prime Minister Antonis Samaras vowed to yank Greece out of its recession within 18 months despite increasingly gloomy forecasts predicting that the economy will wane by 7% this year alone. He also reiterated calls to seek a deal with international bailout creditors “as soon as possible” allowing more flexibility in implementing austerity moves.]

But creditors want Athens first to deliver on a promise of about $14 billion in additional budget cuts that are expected to pile more pain on crisis-plagued Greeks.

As of Monday night, pundits and politicians conceded that the government was still struggling to identify about $2.4 billion of those cutbacks.

“We have a couple of days to go,” a senior government official said on condition of anonymity because of his proximity to the talks. “The prime minister is expected to meet the lead inspectors on Friday and present them with the full plan by then."

The official declined to say whether Prime Minister Antonis Samaras would make an official request to delay implementation of the austerity cuts by two years, a key campaign pledge that helped vault him to power after elections last month.

Failure to win the inspectors’ approval could halt disbursement of about $38 billion in rescue funds to Greece, the biggest installment since the small Mediterranean nation lined up the first of two rescue packages in 2010. Greece needs the money to keep paying its bills, state pensions and salaries.

Leftist opponents accused the government of sticking to a failed program of continued austerity cuts.

“There is no point in meeting the troika,” Alexis Tsipras, leader of the hard-left Syriza Party, said. “Implementing additional austerity measures will be insane. It will lead us to bankruptcy and out of the euro.”


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-- Anthee Carassava

Photo: Greeck Prime Minister Antonis Samaras speaks to his conservative party lawmakers in Athens on Tuesday. Credit: Thanassis Stavrakis / Associated Press