German Chancellor Angela Merkel told visiting Greek Prime Minister Antonis Samaras that she will wait until a report late in September from international lenders before deciding whether Greece is meeting reform targets and should keep getting rescue loans or risk being pushed out of the Eurozone.
Under pressure to make another $14.16 billion in cuts and lower the country’s deficit from 9.3 percent to 3 percent over the next two years, Samaras said Greece needs more time but stopped short of asking for a two-year extension he said is critical.
Greece is surviving on a first series of $152 billion in loans from the Troika of the European Union-International Monetary Fund (EU-IMF-ECB) but the last installment, for $38.8 billion, will be disbursed next month and a second bailout of $173 billion is on hold until the government can show it has made progress on reforms, including more austerity measures.
“What Greece can expect from Germany is that we will not make premature judgments but will await reliable evidence, which for me means the Troika report,” said Merkel.Samaras said Greece will make its payments and earlier gave his “personal guarantee.” He told Merkel that
“Greece will stick to its commitments and fulfill its obligations. In fact this is already happening,” he said during a joint press conference with the German chancellor.
“I want to give three messages: first, we will bring results. Second, we are reducing two deficits at once: a fiscal deficit and a deficit in confidence in the country. Third, economic growth is of crucial importance is order to meet our obligations soon.” He said the Troika report would verify Greece’s progress. “We’re not asking for more money. We’re asking for breaths of air in this dive we are taking,” said Samaras.
A two-year delay, however, could require Greece get a cash infusion of from $25-$62.5 billion more, money he said Greece would try to raise elsewhere, and not from the Troika. That could prove difficult, however, as a previous government imposed 74 percent losses on investors to write down the country’s $460 billion debt by $134 billion, effectively locking Greece out of the markets.
Merkel says she wants Greece to remain in the Eurozone but wants to see it make a greater effort to meet its bailout commitments. She said that she had been encouraged by her conversation with Samaras and felt confident that the coalition government in Athens would do what it could to ensure Greece progresses with its reforms and fiscal adjustments.
She said some progress had been made in Greece and that a lot of people have suffered the consequences of the cuts and the ongoing recession. “We know we are asking a lot from the Greek people,” she said. “They have been walking through a desert for the past five years and need our support.
“I understand that significant steps are being taken in Greece and that the Greek people understand that it is not just the less well-off who should suffer,” an oblique reference to the pay cuts, tax hikes and slashed pensions she put on as conditions for the bailouts and which have pushed many Greeks toward impoverishment while politicians, the rich and tax cheats remain largely unscathed.
Samaras insisted that his uneasy coalition, made up of his New Democracy Conservatives, the PASOK Socialists and Democratic Left would seek to restore trust with its Eurozone partners, saying that Greece was attempting to fix its “credibility deficit” as well as its public deficit. Samaras also asked for “toxic” statements from European politicians regarding a Greek euro exit to cease.
“This cacophony has to stop, regardless of where it comes from,” he said. Greece’s long-delayed efforts to finally privatize state entities and sell or lease its properties has been undermined by constant criticism, he said. “How can a government proceed with privatizations, when a significant European official makes a statement saying Greece will go back to the drachma? Which investor would be interested?”
Samaras’ pitch isn’t over, as he heads to Paris to meet with French President Francois Hollande, a Socialist elected on an anti-austerity platform for his country, but who said Greece has to implement more austerity.
(Sources: Reuters, CNBC)
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