BERLIN (AP) — Greece's international creditors have spelled out the spending cuts and reforms that Athens has to introduce before it can receive vital bailout cash, according to a draft document obtained by The Associated Press on Tuesday.
The measures — which range from getting tougher with tax evaders to cutting prescription drug budgets — reflect the international community's growing distrust of Greek politicians and their history of backsliding on key reforms.
The cuts are part of the large austerity package that lawmakers in Athens passed over the weekend amid violent protests and riots. The country's international creditors — the other 16 countries that use the euro and the International Monetary Fund — are now insisting that they have to be implemented before Greece can get a second, euro130 billion ($172 billion) bailout. Without that money, Greece will be forced into a disorderly default on its debts by the end of March that could seriously disrupt Europe's bank finances and the world's financial markets.
"I can understand the pain and turmoil in Greece," said Olli Rehn, the European Union's economic and monetary affairs commissioner. "But at the same time, this is the framework which has been decided," he said.
"It is really in the interest of everyone in Greece and Europe now to make this work and avoid a disorderly default of Greece, which would have devastating consequences," Rehn said.
Debt-stricken Greece faces a euro14.5 billion ($19 billion) bond redemption deadline which it cannot afford to pay on March 20 and will therefore need the bailout in place by then.
The detail and number of the demands is evidence of the growing mistrust between Greece and its creditors. The country has been criticized in the past for not putting into practice reforms that were either promised and not delivered or enacted into law but never enforced.
This time, the international creditors want to see tangible results and have insisted on a total of euro2.6 billion ($3.45 billion) in cuts that need to be implemented before they transfer any more money.
Included in the measures are a euro1 billion ($1.32 billion) cut in what the country spends on medicine in its state health service, and a euro300 million ($398 million) reduction in the defense budget. Reducing central government and election-related spending will also reduce spending by euro270 million ($358 million), and subsidies of euro300 million ($398 million) to pension funds will also be slashed.
The document says the Greek government must also slash its public investment budget by euro400 million ($530 million).
On top of this, Greece has to find further savings worth euro325 million ($431 million) to meet its debt reduction targets.
Greece's cabinet was set to discuss the new cuts Tuesday and the EU's Rehn has demanded that the details be ready for eurozone finance ministers to assess when they meet in Brussels on Wednesday.
Germany, Europe's biggest economy, has been taking a tough line on Greek compliance. The country's Economy Minister, Philip Roesler, called on Athens to deliver on its pledges, saying Sunday's vote in Parliament was "important but even more important is the concrete implementation."
"Decisions in Parliament are not enough, they then also have to be implemented," he said.
The detailed 49-page document, obtained by the AP from an official in Berlin who received an advance copy, is the Memorandum of Understanding — the legal basis for all international bailouts.
The memorandum also lists many measures that Greece has to implement after the disbursement of its next batch of bailout loans, including structural reforms meant to boost the country's competitiveness.
The finance ministers of Greece and the rest of the 17-country eurozone are expected to sign the Memorandum of Understanding at their meeting Wednesday.
However, German lawmaker Priska Hinz, the opposition Green Party's top member on the Budget Committee, warned that the document still falls short of ensuring Greece's financial stability.
"But the most important information is missing in the document: An assessment of Greece's debt sustainability and details on the negotiations for the debt write-off (with private creditors)," she said.
"We have to be honest. Greece will need our support for many years, for at least a decade, financially and administratively."
Europe must also push ahead with measures to spur growth in Greece, Hinz added.
"People need to see light at the end of the tunnel."
The creditors, meanwhile, say that Greece must step up its privatization efforts, although the country is given more time to sell off state assets. According to the document, Athens has to offer for sale its remaining stakes in state-owned companies excluding "only cases of critical network infrastructure."
Greece has promised that it will sell euro50 billion ($66.3 billion) worth of assets but progress has been slow.
On top of that, Greece has to push through a 25 percent increase in public transport fares and cut its government work force by 15,000 jobs by year's end.
The document also spells out a wide range of data that Greece must provide to its assessors on a regular basis, another sign of the country's loss of control.
Greece has been shut out of long-term debt markets since 2010, and is surviving on an initial package of euro110 billion ($146 billion) in rescue loans from its international creditors since May that year. But harsh austerity measures demanded in return for the emergency loans have hammered the economy, which is in decline since late 2008, with successive quarterly contractions since then, with the exception of the first quarter of 2010.
Fresh figures Tuesday showed that the country's economy shrank 7 percent in the fourth quarter on the year.
Greece is also finalizing a debt write-off agreement with its private creditors, which would be equivalent to a debt relief of about euro100 billion ($132.5 billion).
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Steinhauser reported from Brussels; David McHugh in Frankfurt and Elena Becatoros in Athens contributed to this report.
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Juergen Baetz can be reached on Twitter at: www.twitter.com/jbaetz
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