Austria Blocks Funds For Greek Bailout

Tuesday, November 16, 2010

The Eurozone has another problem. While media attention focuses on Irish bailout talks, the Greek tragedy is about to bubble up again.
Following the publication of upwardly revised deficit figures for Greece, Austrian Finance Minister Josef Pröll announced on Tuesday that Austria is going to withhold a €190 million payment to Greece in December, citing unsatisfactory data and lower than projected tax revenues on behalf of Greece.
"From the current set of data we have there is no reason to release the December tranche from an Austrian perspective," Pröll said according to Austrian media reports before he left for Brussels.
Greek CDS widened to 980 basis points after Pröll's statement, albeit there were no offers.
Austria is the second Euro member after Slovakia abandoning the fragile solidarity in the Euro club. 
Greece said Monday it would miss a target to reduce its government deficit to 8.1% of gross domestic product this year, which was set after Greece took a €110 billion bailout from euro-zone countries and the International Monetary Fund. (Germany put up €22 billion of that total.) As recently as last month, Greece said it would beat its target and report a deficit of 7.8%.
Instead, it now says the deficit is likely to be 9.4% this year, and that government debt would total 144% of GDP at the end of 2010. Citigroup economist Giada Giani said Greece's debt could reach 165% of GDP in 2013. At the time of the bailout, Greece agreed that its 2010 debt would be 133%, rising to 150% in 2013.
Austria's government has come under heavy fire from all sides for its budget 2011. Critics lament that next year's household shows no structural improvements and depends preponderantly on higher taxes while  spending cuts target mainly social expenditures. 45 organisations have called for a mass protest on November 27.


Wikinvest Wire