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International inspectors arrive in Athens for economic review

July 5, 2012 | 12:12 pm

Greek inspectors
ATHENS — After months of political paralysis, international debt inspectors returned to Athens on Thursday to assess how much progress — if any — cash-strapped Greece had made in grueling attempts to fix its faltering economy.

Their report card, experts say, could further test the euro, a shared currency system already battered by recurring debt crises across Europe. It is also likely to make or break Athens’ bid to soften  austerity cutbacks creditors want Greece to observe but which many Greeks, in the midst of the country’s deepest recession in modern history, deem unbearable.

The visiting inspectors from the European Commission, International Monetary Fund and European Central Bank took to their task swiftly.  Arriving 20 minutes ahead of schedule and flanked by squads of stern-faced financial experts, the inspectors plowed through press mobs in central Athens to meet with Finance Minister Yannis Stournaras, just 40 minutes after he took the oath of office.

Stournaras, a socialist-minded economist who helped usher in the euro to Greece a decade ago, agreed to take the finance post after conservative Prime Minister Antonis Samaras’ first choice, banker Vassilis Rapanos, pulled out days after his appointment, citing health reasons.

No officials statements accompanied the first round of 90-minute talks. Nor were there any indications of how long the inspectors would remain in Athens surveying state ministries, poring over the details of a fiscal reform plan that Greece has agreed to follow in return for two multibillion-dollar bailouts.

“Our overriding mission is one,” a senior government official told The Times. “We want to show our creditors that we mean business,” he said on condition of anonymity because of his role in the negotiations.

With unemployment rising and a five-year recession depressing the economy by an additional 7% this year alone — that’s 2.5 percentage points off creditors’ forecasts for 2012 — crisis-hit Greeks recently voted in favor of austerity, fearful that their country could otherwise be jettisoned from the euro.

Despite the vote, international investors and analysts have mounted increasing warnings in recent weeks that Greece’s prolonged political instability is endangering the country’s fiscal adjustment program.

Bailout targets, they say, have been missed. Budget shortfalls have widened. And Germany, Europe’s paymaster, has struck down any talk of loosening the austerity package. 

With a government finally in place (Samaras himself returned to office Thursday after urgent eye surgery that kept him away from his office for two weeks and forced him to miss a crucial European summit late last month), Athens will seek to roll back low-income wage and pension cuts, and delay some $14.4 billion in agreed spending cuts by two years, to 2016.

In exchange, the new administration is set to pick up the pace of privatizations, persuading crisis-battered Greeks to get rid of prized public monopolies, shed surplus state agencies and accept a rash of unparalleled structural reforms. Without proof of such prior action, creditors could leave Greece without its next slice of $38 billion in bailout funds.

Senior government officials said Samaras was due to detail the government’s economic recovery plan in a keynote policy address in parliament on Friday. Creditors, meantime, remained cautious at best.

“[I am] not in the negotiation or in a renegotiation mood at all,” said IMF Managing Director Christine Lagarde on Tuesday.


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Photo: Newly appointed Greek Finance Minister Yannis Stournaras leaves the office of Greek Prime Minister Antonis Samaras after meeting with him and international debt inspectors in Athens on Thursday. Credit: Louisa Gouliamaki /AFP / GettyImages