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 on 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.
Senior EU officials held unannounced emergency talks with the Greek government over the weekend, an EU source said. Greece took a 110 billion euros ($158 billion) rescue package from the EU and IMF last May but has since fallen short of its deficit reduction commitments, raising the risk of a default on its 327 billion euro debt - equivalent to 150 percent 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. EU officials said a new 65 billion euro package could involve a mixture of collateralised loans from the EU and IMF, and additional revenue measures, with unprecedented intrusive external supervision of Greece's privatisation programme.