BERLIN — European economic officials said Monday that Greece must make deeper, faster budget cuts and economic reforms, pushing the debt-strapped nation to meet promised targets to free up more international help.
With the country perhaps within a few weeks of default on its international loans, top Greek officials conferred with European and international monetary officials about what the country needs to do to free $11 billion of upcoming aid.
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Europe puts brakes on Greece’s aid
Talks ended late Monday night in Athens and were to resume on Tuesday. Greek Finance Minister Evangelos Venizelos said in a news release that the talks had been productive.
Standard & Poor’s lowered Italy’s credit rating one notch early Tuesday, to A from A+ with a negative outlook. Asian markets traded lower after the downgrade. Japan’s Nikkei 225 index ended its morning session down 1.4 percent.
Europe has been battling for nearly two years to show convincingly that Greece and other heavily indebted nations such as Italy and Spain will pay all their bills. World markets remain skeptical, and have pushed up borrowing costs for governments and banks throughout the 17 nations that share the euro as a currency. The European Central Bank on Monday released new data showing that it has purchased more than $200 billion in government bonds, much of it in recent weeks to hold down the interest rates paid by Italy and Spain.
The issue is a key concern to U.S. policymakers, who worry that a Greek or other government default in Europe could trigger bank failures, throw the region back into recession — and drag down the U.S. economy in the process.
The head of the International Monetary Fund’s mission to Greece said Monday that the country’s pace of reforms had been slowing, and he called for the government to pick up speed. Greece has promised to reduce the size of public payrolls and sell off inefficient state-owned enterprises, but it has failed to follow through as quickly as expected.
Markets were down around the world Monday on fears that Greece would have difficulty qualifying for the additional bailout money. Major European stock indexes — Germany’s DAX, France’s CAC and the Euro Stoxx — closed down about 3 percent Monday. In the United States, the Dow Jones industrial average and the Standard & Poor’s 500-stock index lost nearly 1 percent.
European officials and the IMF will not release the next round of emergency lending until Greece details how it plans to meet its deficit-reduction targets.
“We expect the Greek authorities to explain, in particular, how they intend to close the fiscal gaps in 2011 and 2012 and how they plan to proceed with the structural reforms and privatizations,” said Amadeu Altafaj Tardio, a spokesman for the European Commission.
European economics officials met during the weekend to discuss the Greek debt crisis but went home with no firm deal to authorize the money, saying that a final decision would have to wait at least two more weeks.
Greece has proposed painful measures to meet steep targets that it agreed to as a condition of receiving the bailout money, including deep pay cuts, furloughs and layoffs in the public sector and higher taxes. So far, many of the proposals have remained just that, although they have provoked violent opposition in the streets of Athens. The delay in releasing the newest installment of bailout money was caused in part by frustration that not enough of the proposals have been made into law.
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