ATHENS (Reuters) - Greece faced a new hurdle in its attempt to avoid bankruptcy on Wednesday as international auditors headed to the Mediterranean state to scrutinize new austerity measures they must endorse for Athens to stay afloat.
The so-called “troika” inspection team is expected to start arriving on Wednesday and to start talks the day after on Greece’s plan to deepen budget cuts and raise new taxes.
This will allow Athens to meet its commitments under a July rescue bailout that also touched off a new cycle of strikes and protests.
Taxi drivers, bus and tram operators and tax collectors prepared to strike for a second day on Wednesday, and rail and metro workers pledged to join them.
Lawmakers opened the way to the troika visit on Tuesday by passing a property tax bill. That piles the pressure on Greeks suffering from several waves of belt-tightening and deepens an economic downturn heading into its fourth year.
Prime Minister George Papandreou’s 154 Socialist deputies forced the measure through in the 300-seat assembly.
Police dispersed thousands of protesters with tear gas in the central Syntagma Square, epicenter of anti-austerity protests that culminated in bloody clashes with police in June.
“I’ve been trying to find a job for a year now and it’s impossible,” said Maria Kappa, a graduate of the School of Philosophy in Athens. “I don’t see the rich people hurt by this austerity, it’s always the poor who have to pay.”
Athens’ inertia in implementing the bailout deal coupled with European leaders’ inability to erect a wider safety net stoked fears a Greek default could bring down other euro zone states like Italy and Spain and trigger a new global recession.
Angry at the Greek government’s slowness in starting reforms, the troika quit talks with Athens this month and threatened to shut off funding unless it mended its ways.
Finance Minister Evangelos Venizelos has since drafted a plan to catch up on the delays, which have put the government behind on a goal to cut the budget shortfall to 7.6 percent of gross domestic product this year.
Once in Athens, the troika will look at the measures and Greece’s budget accounting to judge if the strategy will be enough to put the country on track.
If it agrees, the troika will probably recommend that the EU and IMF release a sixth, 8-billion-euro ($11 billion) loan tranche that Athens needs if it is to pay public wages, pensions and other bills in October.
In the accelerated strategy, the government will cut the 730,000 public workforce by a fifth, reduce the public wage bill by 20 percent, as well as lower overall pensions by 4 percent in addition to a 10 percent already agreed in previous plans.
It will also now extend the new real estate tax until 2014, two years longer than originally planned, after the troika judged Greece’s estimate that it would raise 2 billion euros a year to be two times too high.
The EU and the IMF say Greece has been focusing too much on one-off tax measures to plug its budget gap rather than streamlining the administration and cutting spending.
A senior official also said Greece could announce several new concessions this week that would help it move closer to a target to raise 1.7 billion euros by the end of the month in privatization deals that it looks set to miss.
Speaking at a news conference in Berlin with German Chancellor Angela Merkel, Papandreou said Greece will definitely fulfill its obligations.
He said an expected economic contraction of up to 5.5 percent this year had made the task harder but Greece still intended to eliminate its primary deficit — its fiscal shortfall minus debt maintenance costs — from 2012.
“The conditions have changed due to the recession,” he said. “But the goals have remained the same.”
Editing by Peter Millership