Greece payout likely to go ahead

Greek Red Cross workers demonstrate in front of the Greek Parliament the Greek Parliament on October 11, 2011.
Image caption The Greek austerity measures are hugely unpopular and have led to a wave of strikes and protests

International financial inspectors say they have reached agreement with Greece on reforms to put the nation's troubled economy back on track.

"Economic and financial policies" have been agreed between Greece and the troika of bodies which has been mulling if Athens will get any new loans.

The EU, IMF and European Central Bank say Greece is now likely to get 8bn euros ($11bn; £7bn) more bailout cash.

It came as they said Greece's fiscal target for 2011 was not achievable.

"Once the Eurogroup and the IMF's executive board have approved the conclusions of the fifth review, the next tranche of 8bn euros will become available, most likely, in early November," a statement said.

Some 5.8bn euros would come from the euro area member states, and another 2.2bn from the International Monetary Fund.

"The success of the programme continues to depend on mobilising adequate financing from private sector involvement (PSI) and the official sector, " the troika statement continued.

"Ongoing discussions on PSI together with assurances provided by European leaders at their 21 July summit suggest that the programme remains fully financed," it said.

The statement said that, "the fiscal target for 2011 is no longer within reach, partly because of a further drop in GDP, but also because of slippages in the implementation of some of the agreed measures".

However, it added that that 2012's deficit target of 14.9bn euros should be met if there was a "determined implementation" of the government's austerity plan.

Workplace reforms

The inspectors said they believed Athens was committed to its privatisation plan. Ministers hope to raise 35bn euros by the end of 2014.

The troika said the key to achieving that goal was to ensure that the privatisation fund, which supervises the sell-offs, remains independent.

The auditors also praised a decision to end sector-wide collective labour agreements as "a major step forward".

The government wants pay and terms to be negotiated at a company-level rather than across whole industries, as they have been previously. The move should make it easier for managers to sack employees.

Unions oppose the reform. However the inspectors say it will boost growth and prevent unemployment from becoming entrenched.

The news provoked a mixed reaction.

"It doesn't contain any surprises," said Michael Massourakis, chief economist at Athens-based Alpha Bank.

"Most of these things are known. But of course it is encouraging that the troika have concluded that there is reasonable hope that the agreement will get back on track."

Constantine Michalos, president of the Athens Chamber of Commerce and Industry, was more critical.

"We do welcome the fact that the troika is now coming forward with the proposal to advance the sixth tranche of aid in early November," he said.

"However, the mixture of economic policy which is currently being applied to the Greek economy is completely in the wrong direction. It will lead to a further, and even deeper, recession in 2012"

'Rapidly rising risk'

There was a warning that decisive action is needed to tackle the eurozone debt crisis from Jean-Claude Trichet as he made his last scheduled appearance as president of the European Central Bank. He retires at the end of October.

"The crisis is systemic and must be tackled decisively," Mr Trichet said in a testimony to the European Parliament.

"The high interconnectedness in the EU financial system has led to a rapidly rising risk of significant contagion."

He added that it was "absolutely fundamental" that investors view governments, and their debts, as credible.

Rabobank's senior fixed income strategist, Richard McGuire, interprets the comments as an appeal to politicians to strengthen the European Financial Stability Fund (EFSF).

"It's something he has been pressing for, to ensure there is enough money to bail out peripheral sovereigns and the core banks that have lent to them," he said.

"He believes speed is of the essence, and once governments get dragged down into the crisis there is no further fall back position."