Troika talks with Greece enter critical phase

Negotiations between Greek authorities and the troika of EU/ECB/IMF lenders intensified yesterday in Athens on cuts to the public sector workforce, as Greece struggled to implement the terms of its second EU-IMF programme.

Euro zone finance ministers are due to give the political sign-off to the latest tranche of aid to Greece on Monday, but troika officials have yet to complete the latest programme review as discussions stall over the issue of public sector numbers.

Greece is required to move 12,500 civil servants into a “mobility scheme”, which would require workers to be either transferred or dismissed within a year, but the government has consistently said it needs more time.

Search for deal
An EU source told The Irish Times that negotiators were working "around the clock" in Athens in a move to secure a deal, but warned there was "still some way to go."

The political difficulties involved in implementing austerity measures have been laid bare this week in Greece and in Portugal, raising fears that the euro zone crisis could be reignited after 10 months of relative calm.

Bond yields
The decision this week by two senior Portuguese ministers to resign in protest at austerity measures sent Portuguese bond yields soaring to their highest level in 18 months on Wednesday.

However, markets calmed somewhat yesterday, with 10-year government bond yields retreating back below 8 per cent, amid signs that the Portuguese prime minister would salvage the country’s coalition government.

There are fears that a government collapse in Portugal could delay the implementation of the terms of its €78 billion bailout.

The Mediterranean country followed Greece and Ireland to become the third country to seek and IMF-EU bailout in April 2011, and is due to exit the programme in the middle of next year.

Like Ireland it has made a tentative return to private market funding, issuing its first 10-year bonds since entering the programme in May.

'Safe hands'
Speaking following the European Central Bank's monthly rate setting meeting in Frankfurt yesterday, ECB head Mario Draghi appeared to play down the political difficulties in Portugal, welcoming the appointment of the country's new finance minister.

Mr Draghi said he had been "reassured" by the appointment of the treasury secretary Maria Luis Albuquerque as a successor to former finance minister Vitor Gaspar, who resigned this week. "From this point of view, Portugal is in safe hands, " he said.

Mr Draghi also implied that Portugal would not be eligible for the ECB’s bond-buying programme in the near future.

“You know what the conditions are,” he said when asked whether Portugal might benefit from the programme, known as Outright Monetary Transactions (OMT). The ECB head has previously said that countries must be in receipt of private market funding, and regularly issuing debt, in order to qualify for OMT.