Greece faces its inspectors, Merkel hints at bailout change

Wed Sep 28, 2011 6:24am EDT
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By Michael Winfrey and Ingrid Melander

ATHENS (Reuters) - Greece's lenders sent a team to Athens on Wednesday to inspect a government austerity plan they want implemented in exchange for aid, while Germany suggested a new bailout may be renegotiated as debate raged over the size of losses bondholders should face.

Facing a wave of strikes and protests, Greece's Socialist government is accelerating its debt strategy to meet the terms of an International Monetary Fund and European Union rescue deal so it can receive a new loan next month and avoid bankruptcy.

The "troika" team of inspectors, which had threatened to cut off aid if Athens did not move faster, is expected to begin talks on Thursday on a plan demanded by lenders to deepen budget cuts and raise taxes, which has set off protests not seen since June when riot police fought running battles with activists.

German Chancellor Angela Merkel suggested that parts of a planned new 109-billion-euro ($148.6 billion) rescue for the debt-laden country could be reopened, depending on the outcome of the troika's audit.

"We have to wait and see what the troika ... finds and what it will tell us (whether) we will have to renegotiate or not," she told Greek state television NET, without elaborating.

Several hundred activists affiliated with the Greek Communists converged on the finance ministry on Wednesday waving a banner saying "We won't pay!". They planned to burn bills for a new one-off income tax introduced this summer while Athens and other parts of the country were hit by transport strikes.

If deemed adequate by the inspectors, the new austerity drive will secure an 8-billion-euro loan Greece needs to pay bills and salaries in October and bring it closer to starting a second bailout agreed in July.

As a condition of the visit and to resolve the row with the lenders, the Greek government had promised to send a written assurance outlining its new plan to meet its bailout targets. Its contents have not been made public.   Continued...