Just when you thought Greece couldn't get any messier

10/01/2012 1:50 pm EST


Jim Jubak

Founder and Editor, JubakPicks.com

Confusion rules in Athens today.  Reports say that the troika that represents the countries that have provided the bailout cash for Greece has raised objections to at least 2 billion euros in the latest round of proposed budget cuts. The troika of the International Monetary Fund, the European Commission and the European Central Bank has to approve the Greek budget plan before Greece can receive its next 31.5 billion euro payment under the bailout.

Apparently the troika isn’t convinced that the cuts can be implemented. For example, the government has proposed forcing 15,000 current public sector employees into a labor reserve on 75% of their current pay before firing them outright in 2014. That’s similar to a plan announced by the government more than a year ago. No one has yet been fired under that program.

Greek officials have told troika members that the troika’s insistence on further pension and wage cuts would lead to the collapse of the current government and the almost certain exit of Greece from the euro

Reports from Athens say that part of the problem is an emerging dispute between the IMF and the other troika members. IMF managing director Christine Lagarde has come close in recent days to saying that the only way to reduce Greece’s debt to a sustainable level is another restructuring with bondholders taking another hit. This time, though, the haircut would include the European Central Bank itself and its big holdings of Greek bonds.
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