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Greece 'near deal' with troika - but may withdraw from Euro

Discussions with the EU and IMF are nearing a conclusion – but reports say the government wants a referendum on Euro membership.

Greek prime minister George Papandreou is reportedly preparing a referendum on withdrawal from the Euro.
Greek prime minister George Papandreou is reportedly preparing a referendum on withdrawal from the Euro.
Image: Thanassis Stavrakis/AP

GREECE IS NEARING agreement with the European Union and International Monetary Fund on a course of austerity measures to secure its next batch of bailout loans – but is also reportedly considering pulling out of the Euro.

AFP reports that a conference call between finance minister Evangelos Venizelos and auditors from the EU, ECB and IMF is due to be held later today, following what Venizelos described as a “productive and substantive” meeting yesterday.

This audit had been scrapped a few months ago, when the troika had reportedly grown frustrated at Greece’s slow progress in cutting government spending and raising new tax income.

Greece has to find another €2bn in new taxes, or cut that much in spending, before the EU and IMF release the next €8bn of bailout lending – without which Greece will simply run out of money, and fall into default.

The Economic Times said the IMF was seeking improved tax collection, and larger redundancies in the public service – reportedly looking for 150,000 public staff to be laid off in the next five years.

A sign of how realistic this prospect will be will come later this morning, when the Greek treasury auctions off three-month bonds in a bid to raise €1.25bn of funding outside of the EU-IMF structure.

A relative sign of the interest rate Greece might pay for this short-term borrowing could come from its one-year bond – which, on the second-hand markets, is offering a whopping yield of 127 per cent.

A more long-term solution for Greece could be to withdraw from the Euro entirely – and this morning the Greek newspaper Ekathimerini reports that the government is submitting a bill calling for a referendum on whether Greece should remain as a member of the Eurozone.

The paper suggests prime minister George Papandreou would consider the referendum as an authoritative barometer on whether he has a mandate to press ahead with new budget cuts, or whether other options such as the reintroduction of the drachma could be considered.

Earlier: Greece in “productive” telephone talks with EU and IMF >

More: Ambitious Greece promises to turn budget surplus for 2012 >

Read: Italy’s credit rating slashed by Standard and Poor’s >

About the author:

Gavan Reilly

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