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September 18, 2011

IMF, EU Warn Greece on Austerity, Default

The International Monetary Fund and European Union are increasing pressure on Greece to carry out its budget austerity measures if it hopes to receive more financial assistance and avoid default on its loans next month.

The IMF's representative in Greece, Bob Traa, said Monday that the Athens government must quickly sell some state-owned operations to private ventures and improve tax collection, or risk not receiving an $11-billion segment next month from last year's $159 billion bailout.

He said privatization of the government-owned agencies was behind schedule because Greek lawmakers could not agree on how to carry out the sales. Traa warned, however, that Greece "will go to a default" if it does not act quickly.

The EU said it is not asking Greece for new austerity measures, just compliance with what it already had agreed to, "no more, no less."

Greek Finance Minister Evangelos Venizelos promised that the government would disclose its plans for restructuring the agencies this week. He said the next few days would be "very difficult" for the country and the 16 other nations that use the euro currency as Greece seeks to solve its financial woes.

The Greek economy is mired in a recession, with a 5.5 percent contraction expected this year, and another 2.5 percent drop next year. But the IMF is projecting a return to growth in 2013.

Greek officials prepared for a conference call Monday evening to try to convince officials from the European Union and IMF that the country's austerity plans will be tough enough to reduce budget deficits. The outcome of the call will help determine whether Greece is eligible to receive the next aid payment.

Prime Minister George Papandreou canceled a planned trip Sunday to the United Nations in New York to chair a Cabinet meeting ahead of Monday's assessment of Greek efforts.

Sweden's Anders Borg told the Bloomberg news service that Greece hasn't done enough to meet its budget targets. He said, "They must stick to one message: that they are going to deliver, whatever it takes."

Greece could run out of money in October if it does not get the loan installment, threatening financial havoc throughout the EU and on world markets.

European stock markets fell in afternoon trading Monday amid fears of the deepening Greek financial crisis.

Some information for this report was provided by AP, AFP and Reuters.