VIENNA (dpa-AFX) - The troika of international creditors, comprising the International Monetary Fund (IMF), the European Union and the European Central Bank, have proposed giving Greece two more years to meet its debt-reduction targets, according to a draft report obtained by the media.
The creditors in the report said the revised program is aimed at helping Greece achieve 'the 4.5% of GDP primary surplus target by 2016, two years later than foreseen.' This will help to 'moderate the impact of fiscal adjustment' on the Greek economy in the wake of years of recession.
Nevertheless, the report warned that the two-year extension might require providing Greece with an additional aid of about 32.6 billion euros ($41.5 billion) until 2016. The note also cautioned about risks that could accompany the revised program, including possible political opposition as well as legal challenges to the proposed measures.
The draft report was reportedly prepared for eurozone finance ministers who are meeting in Brussels on Monday to decide on granting Greece the next installment of 31.5 billion euros from the 130-billion euros bailout. Nevertheless, a final decision on the issue is not expected on Monday as it is subject to the completion of conditions earlier agreed by the Greek authorities.
In March, Greece had pledged a series of economic reforms and spending cuts worth 13.5 billion euros for 2013 and 2014 in exchange for a joint 130-billion euros bailout from the troika of lenders. Athens has since been seeking a two-year extension for meeting the debt-reduction targets.
In addition to the next bailout installment, the eurogroup finance minister are also expected to discuss the Greek adjustment program, including ambitious and wide-ranging measures in the areas of fiscal consolidation, structural reforms, privatization and financial sector stabilization.
Greek Prime Minister Antonis Samaras has already said that his government will run out of money by mid-November if it fails to secure the 31.5 billion euro loan installment. Such a scenario would leave Greece insolvent and eventually force its exit from the eurozone.
Notably, the Greek Parliament passed a crucial austerity bill containing 13.5 billion euro worth of cost-cutting measures last Wednesday and an austerity budget for 2013 on Sunday. Both measures were demanded by the country's international creditors in exchange for the next bailout installment.
The latest austerity measures approved by the Greek Parliament are said to include pension cuts, raising retirement age to 67, stepping up privatization program and further spending cuts as well as tax measures.
The move comes as most Greeks are struggling under previously enforced cost-cutting measures demanded by international creditors. The latest austerity program evoked widespread protests across the country, as most Greeks believe that they will add to the burden of the poor and push the country deeper into recession. The country's economy has been mired in recession for five years, and is not expected to recover anytime soon.
Prior to securing the 130-billion euro bailout, Athens had availed a joint EU-IMF 110-billion euro rescue loan in May 2010, of which several tranches have been handed out to Athens.
In exchange, Greece was required to implement painful and hugely unpopular austerity measures, including spending cuts, slashing public sector jobs, pension reforms, privatization of loss-making state-owned companies as well as increasing existing taxes and imposing new ones. However, implementation of these measures were significantly delayed due to elections in June.
Copyright RTT News/dpa-AFX