Is the EU ready to end Greece's bailout?
AP Photo/Petros Giannakouris
(MoneyWatch) Reports are circulating that Greece's funders are considering ending bailout payments because Athens hasn't been able to cut its deficit enough.
Over the weekend German news magazine Der Spiegel said the IMF planned to stop paying further rescue aid to Greece, citing unidentified European Union officials. This was followed Monday with reports that Germany and other important international creditors are not prepared to extend further loans to Athens.
Inspectors from Greece's troika of international creditors -- the European Commission, the European Central Bank and the International Monetary Fund -- arrive in Athens tomorrow to prepare a report on how well the nation is meeting is budget goals.
German Economy Minister Philipp R?sler said on Sunday he was "more than skeptical" that Greece's reform efforts will succeed. "If Greece no longer meets its requirements there can be no further payments," he said in an interview with German public broadcaster ARD. "For me, a Greek exit has long since lost its horrors."
A key ally of German Chancellor Angela Merkel said today that, "Greece should start to pay half of its civil service wages, pensions and other expenditures in drachmas now." Alexander Dobrindt, general secretary of the Christian Social Union, the Bavaria-based sister party of Merkel's Christian Democrats, added, "A soft return to the old currency is better for Greece than a drastic move. Having the drachma as a parallel currency would allow the chance for economic growth to develop."
A German government spokesman said Berlin is awaiting the official troika report before it will debate on any further action on Greece.
There are several reasons why outsiders believe Athens cannot meet the budget goals set out in its latest bailout agreement.
Finance Minister Yannis Stournaras has so far has identified only about $9.6 billion of spending cuts and savings for the next two years out of $14 billion in required additional cuts.
Also, the Greek government hasn't raised nearly as much money from the sale of assets as it had said it would. The outgoing head of Greece's asset-sales fund says Athens is unlikely to generate more than $363 million this year, about one-tenth of the $3 billion targeted for 2012.
Last week, in another sign that lenders has run out of patience, the European Central Bank announced it would stop accepting the country's bonds as collateral in return for ECB funding, at least until it gets a positive report from the troika.
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