Greece in creditor talks after default warning

Greece was to continue talks with the IMF and EU on Tuesday after being warned to tighten austerity measures and ramp up state asset sales to secure rescue funds and stave off bankruptcy early next month.Greek Finance Minister Evangelos Venizelos held a conference call late on Monday with the heads of mission from the EU, IMF and European Central Bank to hammer out a response to serious slippage from agreed budget targets. "(In) the conference call held this evening between the Deputy Prime Minister and Minister of Finance, Mr. Evangelos Venizelos, and high representatives of the Troika (European Central Bank, European Commission and International Monetary Fund) a productive and substantive discussion took place," the finance ministry said in an emailed statement. "Tomorrow morning, the teams of technical experts already in Athens will further elaborate on some data and the conference call will be repeated tomorrow at the same time," the ministry said.Greece is under pressure from its international creditors to plug a budget hole of more than 2.0 billion euros ($2.8 billion).The government last week announced a new hefty property tax and is expected to make further cuts in the country's massive state payroll after the finance minister admitted there is "surplus" staff in the civil service. The talks were held as the International Monetary Fund criticised Greece for wasting time and falling behind target with a long-delayed asset sale, while the European Commission urged Athens to implement the necessary budget cuts and reforms. "It is essential not to be constrained by taboos regarding closure of inefficient entreprises and involuntary redundancies," the IMF's representative to Greece, Bob Traa, told a business symposium near Athens.The IMF and EW warnings were a strong signal that the auditors are not ready to approve the next slice of funding under a first 110-billion-euro ($150 billion) rescue of Greece created last year.Greece has signalled that without the eight billion euros in loans it only has enough money to keep going until sometime next month.The IMF's Traa forecast that the recession-hit Greek economy will recover from wave after wave of crisis cutbacks and tax rises to begin growing in 2013. But he warned that Greece would default without a sweeping sale of state assets that is a condition of a new 159-billion-euro ($219-billion) EU bailout set up last month. "The privatisation is behind schedule because politicians can't agree how to do it. If you wait ... the country will go to a default," he argued."It is no secret that the (rescue) programme is at a difficult moment," Traa said, adding that the Greek economy was likely to contract by 5.5 percent of output in 2011 and 2.5 percent in 2012. The IMF and the EU had expected Greece to gain access to borrowing markets months ago and to return to growth early in 2012.Greece last year slashed its budget deficit by nearly five percent of output, a huge adjustment that was still not enough to meet targets. European stock markets again fell sharply in response to inconclusive weekend EU talks in Poland on the eurozone crisis and signs of economic slowdown in Europe and the United States.There is widespread speculation on financial markets that Greece risks not only bankruptcy but also departure from the eurozone, a possibility which would create chaos but which is strongly rejected by EU mainstays Germany and France. Finance Minister Venizelos admitted that the coming week would be "very difficult" for the eurozone as well as for Greece."We cannot delay any longer. We want results, there must be results," he said in reference to the state privatisation drive first announced in February. Greek media reports suggest that the country, already shell-shocked after two years of constant crisis since the incoming Socialist government admitted that growth and debt figures were false, is about to be hit with more measures totalling about 4.0 billion euros. A senior official source said on Sunday that ministries had been told of 15 conditions from the EU and IMF, including layoffs in public bodies, a freeze on pensions between now and 2015 and the closure of about 30 public organisations. Civil servants on Monday finalised plans for a nationwide strike on October 6, and are in talks with the country's main union GSEE for a full general strike against the austerity measures. Some top EU officials have warned that the eurozone crisis could wreck the European Union, the United States has warned that it poses a "catastrophic" risk to financial markets, and France said after the July 21 meeting that the way forward lay in a big step towards economic government of the European Union.Also on Monday, German central bank chief Jens Weidmann said that while measures to solve the eurozone debt crisis were justifiable in the short term, they could weaken incentives for sound public finances.