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Is a Delay to Greece's Budget Targets Now Inevitable?

Julia Chatterley, CNBC correspondent
Monday, 24 Sep 2012 | 9:36 AM ET

Greek officials vehemently refuted weekend reports that the country will fail to qualify for further international aid until the country closes a 20 billion euro budget gap.

The Parthenon, illuminated at night, sits at the top of Acropolis hill in Athens, Greece, on Monday, Feb. 13, 2012.
Bloomberg
The Parthenon, illuminated at night, sits at the top of Acropolis hill in Athens, Greece, on Monday, Feb. 13, 2012.

Coalition leaders have been struggling for weeks to implement 11.5 billion euro in spending cuts, a sum thought sufficient to satisfy the Troika of foreign lenders: the European Union, the European Central Bank and the International Monetary Fund. But Germany’s “Der Spiegel” magazine reported that trio will not release funding until Greece cuts nearly twice that amount.

The size of budget cuts may be a moot point, say observers, who believe that Greece will have no choicebut to ask for a two-year extension in which to meet budgetary targets.

A non-starter just a month ago, whispers of a delay to Greek budget cuts emerged from the meeting of European finance ministers in Cyprus two weeks ago. French Prime Minister Jean-Marc Ayrault appeared to give his blessing to an extension, telling the website “Mediapart” that "The answer must not be a Greek exit from the euro zone. We can already offer it more time...on the condition that Greece is sincere in its commitment to reform, especially fiscal reform."

With the Greek public feeling increasingly disillusioned, coalition lawmakers may find it difficult to reach consensus on where the axe should fall. More than 90 percent of Greeks believe the planned spending cuts and reforms are unfair and burden the poor, according to a survey by polling agency MRB for Sunday's edition of Realnews. A general strike, the first since the coalition came to power in June, is due this week. .

While the public prepares to show its anger on the streets, Prime Minister Antonis Samaras has increased the pressure on his party and its coalition partners. According to press reports, Samaras has threatened to any expel members of his New Democracy party – the largest and most-pro-bailout parliamentary bloc — who vote against the cuts.

But it’s not just Greek legislators at odds over implementing extreme measures to safeguard the future of the euro. In his recent State of the Union Address, European Commission President Jose Manuel warned darkly of the rise of extreme political parties in response to the implementation of austerity measures across Europe.

"We have seen time and again that interconnected global markets are quicker and more powerful than fragmented national political systems. This undermines the trust of citizens in political decision-making. It is fuelling populism and extremism in Europe," he told the European Parliament.

A poll in Greece last week showed a near doubling in those expressing a positive view about the extreme right Golden Dawn party to 22 percent, from just 12 percent in May. Barroso also stressed that Europe must clearly affirm the case for the integrity and the irreversibility of the euro.

“Over the last four years we have made bold decisions to tackle the systemic crisis, but despite all these efforts, our responses have not yet convinced citizens, markets or our international partners."

Contact Europe: Economy

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