Greece lumbers toward aid payout, may face added conditions

Shrunken Coalition

Creditors’ assessment of whether Greece is entitled to the next tranche in 240 billion euros of loans was jolted last month by a government upheaval in Athens, in which Samaras lost one of his two coalition partners in protest of his sudden closure of the ERT state broadcaster.

Samaras handed more prominent ministries to the socialist Pasok party, his New Democracy party’s historic rival, in the ensuing reshuffle. The shrunken coalition has 155 of the 300 seats in parliament, with Pasok’s 28 lawmakers holding the key to legislation.

The troika gave the coalition a lengthy to-do list, including “concrete steps” to control health-care overspending, income and property tax reform, and politically sensitive cuts in government payrolls, termed “mandatory exits” in today’s statement.

Greece has also failed to generate planned revenue from selling state assets. The latest setback came last month, when no bids came in for the national gas company Depa SA.

‘Further Bumps’

“The long-term problem is that the fiscal plan for Greece is entirely implausible,” said Fredrik Erixon, head of the European Centre for International Political Economy in Brussels. “There’s a charade going on between the troika and the Greek government and there will be further bumps in the road regarding future bailout payments.”

Finance ministers will touch on other crisis hotspots tonight, at the last scheduled meeting until Sept. 13. Schaeuble and Spanish Economy Minister Luis de Guindos voiced confidence that Portugal’s political disturbances won’t throw its aid program off track.

Prime Minister Pedro Passos Coelho last week brought in a new finance minister and upgraded the governing role of the CDS party, his coalition ally, in order to keep his cabinet together and avoid early elections.

“The situation in Portugal is back on track,” De Guindos said. “The latest agreement they announced will provide stability for a country that is doing all its homework.”

Finance ministers will also examine the state of the economy and banks in Slovenia, which is seeking to escape becoming the sixth country to fall back on international aid.

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