Suspended inspection

International debt inspectors on Friday suspended a review of Greece's progress in implementing economic reforms and left Athens.

Under the terms of the European Union and International Monetary Fund bailout of Greece, Athens is required to make a series of reforms aimed at reducing its massive public debt.

The officials said in a statement that they had "temporarily left Athens to allow the authorities to complete technical work, among other things, related to the 2012 budget and growth-enhancing structural reforms." They are expected to return to Athens in the next two weeks.

The apparent discord between officials from the European Commission, the European Central Bank and the IMF on the one hand and Greek officials on the other has put the payout of the latest 8-billion-euro ($11.4 billion) tranche of the bailout in jeopardy.

Damage control

Greek Finance Minister Evangelos Venizelos attempted to play down talk of a rift between the two sides. At a hastily called press conference, Venizelos said the talks had been conducted in a "very friendly and creative climate."

However, Venizelos also warned his fellow countrymen of more economic doom and gloom ahead, saying Greece's economy would shrink by as much as 5 percent this year - far worse than the 3.75 percent drop predicted just three months ago.

The deepening recession is making it increasingly difficult for Greece to meet its deficit reduction targets. It now appears unlikely that Greece will reach the goal of reducing its deficit to 7.5 percent. The Finance Ministry has declined to release new projections, but media reports have predicted a deficit of between 8 and 8.5 percent for 2011.

No new taxes

Venizelos also indicated that his government would not be implementing any new tax increases in the near future.

"The main thing is for us to halt the recession," he said. "To not have actions or omission that will make the recession deeper and will not allow us in 2012 to have a better macroeconomic performance."

The departure of the inspectors follows a similar incident in June, when the group left Athens but returned weeks later after the Greek parliament had passed fresh reform measures.

Getting it right

In contrast, the news for fellow bailout recipients Ireland and Portugal was much better on Friday. The two countries passed their quarterly debt inspections with flying colors.

The Portuguese and Irish governments have been "demonstrating their commitment to addressing underlying weaknesses in public finances and the public sector and as regards competitiveness," the EU said in a statement.

Ireland was granted a 67.5-billion-euro bailout from the EU and the IMF last November, while Portugal received a 78-billion-euro bailout in May.

Greece was the first to require a bailout, receiving its 110-billion-euro package in May 2010. It was promised a second bailout worth 109 billion euros in July.

Author: Chuck Penfold (dpa, AP, AFP)
Editor: Martin Kuebler