Greece falling short of rescue terms: ECB's Nowotny

Reuters

VIENNA (Reuters) - Greece seems not to have met terms of its international rescue package recently, European Central Bank Governing Council member Ewald Nowotny was quoted as saying on Friday.

"Greece has apparently not fulfilled the conditions sufficiently of late. The issue of privatisations will be the most sensitive point here," Austria's Kronen Zeitung quoted him as saying.

Continue Reading Below

It appeared to be the first public confirmation that a joint inspection team from the ECB, the European Commission and the International Monetary Fund now in Athens has found shortcomings in Greece's implementation of its bailout program.

On Thursday, Greek government sources told Reuters the troika inspectors were pressing Athens to slash public spending further to make up for a likely shortfall in revenue this year.

"They are forming an opinion that there are difficulties," said one senior government official who requested anonymity. "They are concerned there is a high risk revenue targets will not be met and are pressing for more spending cuts."

At stake is a 12 billion euro tranche of aid due next month and key to paying 13.7 billion euros of immediate funding needs. Without it, Greece could effectively default.

A senior EU source involved in crisis management in the euro zone debt crisis told Reuters Greece would have to commit itself to taking additional measures this year to ensure it met its targets.

He also said European partners needed to see a breakthrough in Greece's stalled privatization program so the country can raise more funds by offering those assets, or securitized future revenues, as collateral for future loans.

Euro zone finance ministers would receive the inspectors' report at the end of May and were likely to take decisions on the next steps for Greece in June or more probably July, given the time needed to secure agreement among multiple stakeholders and ensure broad political support in Greece, he said.

Greek ministers have acknowledged that Athens is unlikely to be able to return to capital markets to raise 27 billion euros next year as foreseen in its EU/IMF program, and a further 38 billion euros in 2013.

The EU source said most of the funding shortfall would have to be raised through collateralizing or securitizing the proceeds of privatization, with the rest coming from the euro zone and the IMF.

Greece is seeking a further extension of maturities on its 110 billion euros in rescue loans and a further cut in the interest rate on euro zone lending, which was reduced by one percentage point in March.

(Reporting by Michael Shields in Vienna, Dina Kyriakidou in Paris and Paul Taylor in Paris; writing by Paul Taylor)