Inspectors from the international lenders keeping Greece afloat return to Athens on Tuesday to relaunch its stalled economic plan and decide whether to keep the nation hooked up to a 130-billion-euro lifeline or let it go bust.
The euro zone member has fallen behind targets agreed as conditions of its bailout deal, mainly due to three months of political limbo as it struggled to form a government after two inconclusive elections but also because of resistance to reforms from unions and special interests.
Earlier this month the troika of lenders – the International Monetary Fund, European Commission and European Central Bank – told the new, conservative-led coalition government that no more funds would be forthcoming unless Greece shows results.
Greece blames a deeper than expected recession, seen at almost 7% of GDP this year, for missing its tax revenue and budget deficit goals and wants two more years' breathing space to avoid inflicting harsher fiscal measures on a public already enduring tax hikes, spending and wage cuts and record joblessness.
By the end of this year Greek GDP is expected to have shrunk by about a fifth since 2008, while nearly one in four workers are unemployed.
Troika officials say Athens is failing to implement measures that will boost growth, such as planned privatisations, a major tax reform and the opening of closed markets and professions.
"The programme has not produced the desired results because it was not implemented. We must first see the government fulfil its commitments and then decide if it works or if it needs to be adjusted," a troika source told Reuters.
A troika team arrived in Athens late on Monday and will begin meetings at ministries early on Tuesday, while the heads of the mission arrive later in the week and are scheduled to see Finance Minister Yannis Stournaras on Thursday.
He is under political pressure to demand a renegotiation of the bailout terms – a key pillar of the coalition with the socialist and the leftist parties, who say the mix of measures is wrong and only punishes the poor.
Stournaras, an economist who chaired a respected think-tank before becoming minister, has said he will not ask for an extension or change of terms before proving the new government's credibility – starting with 11.7 billion euros' worth of cuts for 2013-14 that should have been drawn up in June.
With just days to go before the troika chiefs arrive, the government has come up with only about 8 billion euros' worth of cuts and was scrambling to close the gap.
In the meantime, the lenders may have to extend Greece a bridge loan to cover a 2.3 billion euro bond payment due in late August to stop it going bust and putting Italy and Spain in the markets' firing line, but that will also depend on this week's talks.
