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Eurogroup chief: Lenders, Greece should agree soon

Associated Press Modified: October 8, 2012 at 8:01 pm •  Published: October 8, 2012
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LUXEMBOURG (AP) — Greece and its international lenders need to agree quickly on a program of reforms so the next tranche of bailout loans can be released, the head of the group finance ministers from the 17 countries that use the euro said Monday.

Inspectors for the so-called troika — the International Monetary Fund, the European Central Bank, and the European Commission — are currently in Greece, looking for ways to reduce the country's debt. Greece needs more money soon to avoid defaulting on its obligations.

Greece has depended on bailouts from Europe and the IMF since May 2010. To get the loans, it has implemented a series of deep budget cuts and tax hikes, while increasing retirement ages and facilitating private sector layoffs.

However, Athens must pass further austerity measures worth €13.5 billion ($17.5 billion) over the next two years to qualify for its next rescue loan payment — without which the government will run out of cash next month. It is these cuts and tax enforcement measures that Greece and the troika are currently negotiating.

Jean-Claude Juncker, the eurogroup chief, speaking to reporters in Luxembourg after a meeting of the finance ministers of the euro countries, praised Greek officials and their willingness to do what is necessary for the country and its economy. And he said a report from representatives of the troika was largely positive.

"We were happy to learn that substantial progress has been made over the last weeks — and, mainly, days," Juncker said. "We called on the troika to finalize their negotiations and agree on a complete set of measures to close the fiscal gap for '13 and '14 as soon as possible."

Juncker and IMF chief Christine Lagarde emphasized that it was still necessary for Greece to fully implement all the measures it had agreed to in March — by Oct. 18, at the latest, Juncker said — for the next slice of aid to be released.

Earlier Monday Olli Rehn, the EU's financial and monetary affairs commissioner, said he was "less pessimistic" about the future of the euro than he was earlier this year — but warned that the region was still a long way to go before the financial and economic crisis is solved.

Meanwhile the International Monetary Fund lowered its outlook for world economic growth ahead of its annual meeting in Tokyo. The IMF forecasts that the world economy will expand by 3.3 percent this year, down from an estimate of 3.5 percent growth issued in July. Among the 17 nations that use the euro, low growth in the major "core economies," such as Germany and France, will be offset by outright contractions in the smaller economies, leading real gross domestic product to fall by about 0.4 percent in 2012, the IMF said.

The IMF thinks growth in the euro area will stay flat in the first half of 2013 and tick up to about 1 percent in the second half of the year, the IMF said.

The eurogroup of finance ministers is meeting during a period of relative calm for the eurozone. This year, leaders of the European Union and its institutions have taken steps to alleviate the concerns surrounding the region's debt crisis. The European Central bank said Sept.6 that it would be willing to buy unlimited amounts of debt in countries like Spain and Italy, which are struggling with high borrowing costs.

Also the EU has acquired significant new powers designed to help it resolve the current crisis and prevent new ones. These include the power to closely monitor national budgets and demand changes in them. Also in the works is a central banking supervisor.

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