Greece expects to win a qualified thumbs-ups for its efforts to resolve a debt crisis and to get approval for a fresh 9 billion euro payment from its bailout fund once IMF and EU inspectors wrap up a visit on Thursday.
But the fresh handout, which is due next month, may come with calls to speed up energy sector reforms and the government's privatisation programme, local media and officials said. Dubbed the 'troika', the team from the International Monetary Fund, European Commission and European Central Bank is assessing Greek progress in cutting the deficit and pushing labour market and other reforms before releasing the second tranche from the 110 billion euro ($145 billion) programme.
"So far, it seems we are meeting our targets and responding to the obligations, faster than the original timetables," Labour Minister Andreas Loverdos told reporters on Wednesday. "This is what the troika verified during our meeting."
They are expected to present their findings during a news conference at 0800 GMT (1100 local time) on Thursday.
Government officials said they were expecting the team to report positively on state spending cuts, which were above target and could offset lower than expected revenues. They said they would redouble efforts to fight tax evasion.
"There will be reference to the need to liberalise the energy market. They are especially worried about the situation at hospitals, local government and state companies because of their debts," a senior government official told Reuters on condition of anonymity.
CALLS FOR MORE EFFORTS
The country's central bank urged Greece to stick to reform efforts to convince business and financial markets that it is dealing effectively with its debt crisis. [ID:ATH005625]
Five-year credit default swaps on Greek sovereign debt were last at 695 basis points versus 130 for Italy, the benchmark for the euro zone's peripheral economies. This means it would cost 695,000 euros to insure 10 million euros of Greek debt against default.
Greek media reported the EU/IMF team had asked Greece to sell parts of state utility PPC <DEHr.AT> and deal with its loss-making rail operator, both entities with strong labour unions that have already opposed the reforms.
State hospitals, municipalities and state-owned companies have long been burning holes in the budget and the government is introducing better controls, such as appointing managers and accountants.
Athens is optimistic it will be able to cut the budget deficit to 8.1 percent of gross domestic product (GDP) this year from 13.6 percent in 2009, after slashing wages and salaries and hiking taxes in the face of a brutal downturn.
Inflation has jumped to over 5 percent in May and June, much higher than the euro zone average, partly due to value added tax (VAT) and other tax hikes, showing weak competitiveness and highlighting the need to open up professions and markets.
Resisting liberalising their sectors, seamen blocked ports at the start of the key tourist season in May and truckers went on strike for a week affecting fuel and goods supply, but the government stood its ground.
EU and IMF progress reports have been positive for Greece, saying it was on track to meet key goals, but analysts warned risks remained high, stemming both from the risk of social unrest and from a slow economy.
Greece plunged into its first recession in 16 years in 2009 and GDP is expected to shrink by a further 4 percent this year.
"There is a risk that the economy's contraction may intensify in the second half of the year. And that should weigh on government revenues," said Diego Iscaro of Capital Economics. "Our latest forecast for the deficit is 8.3 percent of GDP by the end of the year."
