Greece Says Bailout Break Would Help Economic Recovery

Hoping to press the case that Greece needs more time to hit fiscal targets demanded by international lenders, a report from the country’s Finance Ministry said that a possible recovery could be spurred by allowing two more years for new reforms and cuts to be imposed.
The Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) is insisting on another $14.16 billion in cuts before releasing a last installment, some $38.8 billion, in a first series of $152 billion in rescue loans. Also being withheld is a second bailout, this one for $172 billion.
Prime Minister Antonis Samaras has reversed himself several times over whether to try to renegotiate the terms, that include more of the harsh austerity measures that have worsened a deep recession, put 1.15 million people out of work, shrank the economy by 6.2 percent in the first quarter – while debt has increased $28.58 billion. But this coming week, Samaras will meet with German Chancellor Angela Merkel, whose country foots much of the bailout bills, and French President Francois Hollande, with Greek media suggesting he may indirectly ask for a two-year extension and use the report to show how devastating the austerity measures are that he supported.
The report said the debt-stricken country’s economy will recover faster and its debt be more sustainable if it is given two more years to reduce its budget deficit, the Greek newspaper Imerisia reported. Before he heads out to meet Merkel and Hollande, Samaras will host Eurozone chief Jean-Claude Juncker, overseer of the 17 countries including Greece which use the euro.
The Troika wants Greece to lower its 9.3 percent deficit to 3 percent of Gross Domestic Product (GDP) by the end of 2014, a target analysts said can’t be met if there are more of the pay cuts, tax hikes and slashed pensions that have made Greeks keep their wallets and pocketbooks tucked away and depressed spending.
The latest estimate cited calculations by unnamed Finance Ministry officials who worked out that a two-year extension would help the economy shrink at a slower pace in 2013 and rebound quicker from 2014. Under such a scenario, the economy would shrink by 1.5 percent in 2013 and grow by 2 percent in 2014, the newspaper said. If no extension was granted, the economy would contract by up to 4.5 percent next year and not recover before 2015, it said.
Samaras’ uneasy coalition government, which includes his New Democracy Conservatives and its rival PASOK Socialists and the tiny Democratic Left, is arguing that growth can’t be restored unless Greece gets a break. The Troika wants the debt, now at $374 billion and 165 percent of GDP, to be cut to 120 percent by the end of next year, what many critics said is a mathematical impossibility and a political, not an economic target. There is already a clause in Greece’s second bailout deal that says the deficit adjustment period could be extended if its recession is deeper than expected.