EU hastens Greek package work

The European Union is urgently working on a second bailout package for Greece in a race to release vital loans next month and avert the risk of the Eurozone country defaulting, EU officials said Monday. Greece's conservative opposition, meanwhile, demanded lower taxes as a condition for reaching a political consensus with the Socialist government on further austerity measures, which Brussels says is needed to secure any further assistance. "You want to raise taxes and raise consensus with us, who have set reducing taxes as a priority? Don't even think about it," opposition New Democracy leader Antonis Samaras said. Moves to plug a looming funding gap for 2012 and 2013 were accelerated after the International Monetary Fund said last week it would withhold the next tranche of aid due on June 29 unless the EU guarantees to meet Athens' funding needs for next year. Emergency talks Senior EU officials held unannounced emergency talks with the Greek government over the weekend, an EU source said. Greece took a €110 billion (Dh575 billion) rescue package from the EU and IMF in last May but has since fallen short of its deficit reduction commitments, raising the risk of a default on its €327 billion debt — equivalent to 150 per cent of its economic output. The tax cuts sought by the opposition could aggravate a revenue shortfall which a "troika" of EU/IMF inspectors found on a review mission in Athens, due to be concluded this week. Samaras says the cuts are essential to revive economic growth but a government spokesman told Greek radio it could not put its fiscal targets at risk and said there were no grounds for fresh talks with the opposition in the near term. "We would like to tell people that we will reduce taxes and tax rates," he said. "But if we do this, we might not have the needed results. And we can not put our targets in risk." Brussels/Athens (Reuters) Uncertainty over whether Greece will receive the next €12-billion (Dh62.71 billion) aid tranche required to meet €13.4 billion in funding needs in July continued to rattle financial markets. The Greek 10-year bond spread over safe haven German Bunds rose by 20 basis points to 1,387. Two-year yields were up 58 basis points to 26.23 per cent. The European Central Bank continues to oppose any EU attempt to restructure Greece's debt mountain, even by asking investors to accept a voluntary extension of bond maturities. ECB board member Lorenzo Bini Smaghi said in an interview published yesterday the idea that debt restructuring could be carried out in an orderly way was a "fairytale".