ATHENS (Reuters) - Greece moved closer on Monday to averting immediate bankruptcy, wrapping up talks with EU and IMF officials on a vital tranche of aid and expressing hopes of winning better terms on a new bailout deal agreed by European Union leaders in July.
Without the next 8 billion euro aid installment Athens could run out of cash as soon as mid-November, risking a default that would suck the euro zone deeper into a debt crisis already shaking financial markets worldwide.
“After a long series of talks and meetings with representatives of the troika, we have concluded the circle of scheduled meetings and the mission is expected to be concluded by tomorrow,” Finance Minister Evangelos Venizelos told lawmakers.
The EU, IMF and ECB mission chiefs, known as the troika, are likely to conclude their visit to Athens by issuing a joint statement by Tuesday. Back in Brussels and Washington, they will prepare reports for euro zone finance ministers and the IMF’s board, who will decide on the aid tranche.
Greece has returned to the center of the euro zone debt crisis as a deep recession and problems in implementing planned austerity measures have upset the center-left government’s deficit targets and threatened to derail international bailout efforts.
Prime Minister George Papandreou is expected to travel to Brussels on Thursday for talks with European Council President Herman Van Rompuy, who said that a summit meeting planned for early next week would be delayed until Oct 23.
The aid tranche being discussed on Monday would come out of a 110 billion euro bailout deal agreed last year that is expected to be replaced by a second package of measures agreed in July and amounting to some 109 billion euros.
Venizelos said Greece expected improvements on the second, 109 billion euro aid package and hinted that banks will take heavier losses than initially discussed, calling it “PSI Plus”.
“We expect an overall package better than the one initially drafted, because we have to take into consideration the new parameters,” he said, alluding to a deeper than expected recession that has derailed Greece’s budget deficits.
The second bailout foresees private sector participation, with banks discussing taking a 21 percent loss in a Greek bond swap, which is being reviewed by euro zone finance ministers as a bigger haircut may be necessary.
Even if the latest aid tranche is agreed, it would only provide temporary relief for a problem which has defeated efforts for a solution by the EU and now poses a threat to the future of the whole euro zone.
The troika inspectors resumed their review of Greece’s finances and reforms at the end of September, nearly four weeks after suspending talks over disagreements on the steps required to put the country’s finances back on track.
Senior officials from the troika said last week they wanted more details on the impact of plans to slash the public sector workforce and increase taxes before concluding their review. [
They have also complained that agreed structural reforms and privatization are behind schedule. Deputy Prime Minister Theodoros Pangalos told reporters in Paris that Greece remained committed to its ambitious selloff plan but had received little interest from European investors.
“We want to remain European ... We want most of the capital invested in Greece to be European,” Pangalos said but added that China was interested in building a high-speed railway.
Even as Papandreou’s now deeply unpopular government comes under pressure from international bodies like the IMF to take tougher action, it faces growing public anger at the bitter medicine being administered to ordinary Greeks.
On Monday, workers at state-owned companies announced plans for a strike against planned pay cuts next week, a day before Greece’s two biggest unions, representing about half the country’s workers, plan a separate 24 hour strike on October 19.
The leaders of Germany and France promised on Sunday to unveil a new comprehensive package for solving the euro zone’s debt crisis by the end of the month. But they offered no details and papered over differences on how to shore up European banks.
Greece’s central bank said on Monday it had activated a rescue fund to save Proton Bank, effectively nationalizing the lender, which is under investigation for possible violation of the country’s money-laundering laws.
Government spokesman Ilias Mosialos said Proton was a special case and there were no plans for any other bank privatizations.
However Greek bank stocks tumbled 11 percent on Monday on concerns that other banks may follow small lender Proton in using a rescue fund.
“After the use of the rescue fund for Proton Bank, there are concerns that other banks might follow, which would have a negative impact for their shareholders,” said an Athens-based bank analyst who declined to be named.
Another Greek analyst said investors were also concerned by the risk of a bigger haircut on Greek government bonds.
Additional reporting by Renee Maltezou and Jan Strupczewski in Brussels; Writing by James Mackenzie