Bloomberg News

EU Recommends Paying Greek Aid Loans ‘as Soon as Possible’

October 20, 2011

(Updates with additional comments starting in second paragraph. For more on the euro crisis, click on EXT4 <GO>)

Oct. 20 (Bloomberg) -- The European Commission recommended paying Greece the next installment of aid as “soon as possible” after Prime Minister George Papandreou secures parliamentary approval for new austerity measures.

The draft report from the Brussels-based commission, one of three organizations providing financing to the country, said Greece’s debt remains “extremely worrying” and the ratio, which exceeded 140 percent of gross domestic product at the end of 2010, will remain “at very high levels for many years.”

This will leave the country “vulnerable to adverse shocks,” it said.

“The commission services recommend the sixth disbursement to Greece to take place as soon as possible -- as soon as the agreed prior actions on fiscal consolidation, privatization and labor market reform, which were announced by the government, have been legislated,” according to the report.

Papandreou will test his four-seat parliamentary majority today as lawmakers vote on the austerity measures demanded by the European Commission, the European Central Bank and the International Monetary Fund, known as the troika, before a crisis summit of European Union leaders on Oct. 23. Clashes took place among protesters outside parliament as lawmakers debated the measures, which include controversial changes to collective- labor agreements.

The troika said Greece’s medium-term growth prospects may be lowered as even more measures will likely be needed to meet 2013-2014 deficit targets. Greece’s economy will contract 5.5 percent this year and 2.8 percent next before growing 0.7 percent in 2013, according to the report.

While Greece’s “near-term privatization targets need to be readjusted,” the longer-term objective “remains viable,” the report said. Under the last round of measures passed in June, Greece planned raising 5 billion euros ($6.9 billion) in state- asset sales this year, and 50 billion euros through 2015.

--With assistance from Brian Parkin in Berlin. Editors: Fergal O’Brien, Jeffrey Donovan

To contact the reporters on this story: Marcus Bensasson in Athens at mbensasson@bloomberg.net; Maria Petrakis in Athens at mpetrakis@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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