Troika challenges Greece over €2bn fiscal gap in budget Greece faces tough negotiations with international lenders over a looming fiscal gap in the 2014 budget that could undermine its chances of emerging from a six-year recession. The "troika" - the European Commission, European Central Bank and International Monetary Fund - wants the government to adopt further austerity measures after identifying a potential shortfall of €2bn in the latest budget draft submitted by Athens. Greek finance ministry officials say the gap amounts to only €500m and can be covered through a crackdown on social security fraud by thousands of cash-strapped small businesses who fail to pay contributions. "There is a clear disagreement," said a senior finance ministry official. The troika always presses for additional measures but we've reached the limit for making horizontal cuts in wages and pensions. The social pressures are becoming unsustainable . . . Greek households on average have lost more than one-third of their income over the past five years," the official added. The dispute has emerged as Greece's credibility with international financial markets improves, with yields on government bonds falling this week to the lowest level since last year's second €173bn international bailout. Hedge funds are investing heavily in warrants on Greek bank shares, fuelling a recovery on the small Athens stock exchange. "Markets are reflecting progress with stabilising the economy," said Nikos Karamouzis, chief executive of Geniki Bank in Athens. "There are still pending issues but there is optimism that difficulties will be overcome." Greece is on course for a primary budget surplus this year, before debt repayments, thanks to higher revenues and tighter controls on spending, despite continuing cost overruns for state healthcare and a rising deficit at IKA, the main social security fund. Next year's budget draft was thrown off track by two last-minute decisions: dropping a tax surcharge on self-employed workers and postponing salary and pension cuts for "uniformed" workers - the armed forces, police and coastguards. "There was particularly strong political reaction to including the uniformed workers in the unified wage grid that's already been adopted in the rest of the public sector," the finance ministry official said. International lenders are concerned that next year's revenue targets may be missed because of delays in overhauling the tax administration. The government has already missed a troika deadline for moving 12,500 civil servants into a temporary "mobility"reserve on lower pay, who face sacking if they fail to find other jobs in the public sector. Some economists doubt whether a new single property tax due to be introduced next year, replacing several levies, usually collected after long delays, will achieve its target of €3bn in revenues. Introducing a new tax is always fraught with problems because of bureaucratic inefficiency. Because this one is intended to be self-assessed, it may face considerable taxpayer resistance, "said a private sector economist who declined to be identified.