Troika Breaks Off Budget Talks With Greece

IMF envoy Poul Thomsen isn’t talking for now

Greece’s negotiations with international lenders hit another snag on Oct. 16 when the envoy of the International Monetary Fund (IMF) broke off talks and said he had to brief the agency’s chief, Christine Lagarde on the lack of progress.

The abrupt departure of Poul Thomsen, the head of a team that also includes representatives from the European Union and European Central Bank in the so-called (EU-IMF-ECB) Troika, postponed the talks, dashing Prime Minister Antonis Samaras’ hopes of reaching a deal on $17.45 billion in spending cuts and tax hikes before an Oct. 18 meeting of EU leaders.

Thomsen was meeting with Labor Minister Yiannis Vroutsis when he announced that talks over public sector reform would have to be postponed so he could brief the IMF chief. His departure was followed by that of EU envoy Matthias Mors and the ECB’s representative Klaus Mazuch.

Sources told the newspaper Kathimerini, however, that the Troika walked out after talks broke down over the government’s refusal to reform the pay structure for public workers that included the lenders demands to fire 150,000 workers by 2015, reduce severance pay drastically and reduce the time of notice before firings, and require a six-day work week.

Samaras had said he was hopeful of being able to present a deal – although it still would have to rubber-stamped by the Parliament his uneasy coalition government controls. The break-off of talks puts a crimp in Samaras’ hopes of getting the Troika to quickly release a $38.8 billion installment, the last in a first series of $152 billion in rescue loans. A second bailout, for $172 billion, is also on hold until Samaras’ uneasy coalition gets the sign-off from the Troika for more austerity measures.

Greece has depended on bailouts since losing access to bond markets in 2010. The cash payments are conditional on Athens sticking to a strict debt reduction program, but without the rescue monies, Greece will be unable to pay its workers and pensioners and could face being forced out of the Eurozone of the 17 countries using the euro as a currency and fall into catastrophe.

It remained unclear when Samaras would meet with his coalition partners, Socialist PASOK chief Evangelos Venizelos and Democratic Left chief Fotis Kouvelis, to sign off a new package that includes more of the pay cuts, tax hikes and slashed pensions all three had vowed to resist before the June 17 elections, but since have reneged on. Also holding up the talks is the government’s refusal to open so-called closed professions, such as lawyers, architects, engineers and others who enjoy near-monopolies and guaranteed profits.

The government wants unneeded workers or those without a position after the merger of redundant state agencies to be suspended and prohibit firings, except for those who have been disciplined for workplace violations. Under the Greek Constitution, however, workers cannot be fired for virtually any reason, including incompetence or wrongdoing.