Greek Finance Minister Yannis Stournaras, who is placing all his bets on austerity and hopes for growth to offset a crushing economic crisis, said it had better work because there’s no backup Plan B in place.
Despite that, he said he’s still confident – one of the few – that relentless pay cuts, tax hikes, slashed pensions, public worker firings and fingers-crossed wishing that privatization works out will be successful will mean Greece won’t need to try to impose losses on its international lenders the same way a previous government did to private investors.
Stournaras said he doesn’t believe Greece will need a debt restructuring and that it will achieve a primary surplus – not counting interest on loans which is much of the cost of the government – by the end of the year.
Speaking from Athens on Bloomberg Television’s The Pulse,, he was upbeat and said the country will return to growth in 2014 because “the fiscal situation has already improved tremendously.”
That’s at odds with projections from the International Monetary Fund (IMF,) which, along with the European Union and European Central Bank makes up the Troika of lenders putting up rescue monies, and which said there could be a $14 billion gap that needs to be filled next year. Stournaras wasn’t concerned about it and said there will be no further austerity measures put on beleaguered Greeks.
Asked about the IMF’s fears of a giant hole in the economy, he said, “This is not our greatest concern. It is a small amount of money. Greece is covered up to 2014.” He didn’t explain how the government would find $14 billion, however.
Greece is in the sixth year of a recession deepened by spending cuts and tax increases linked to a 240-billion-euro ($319 billion) bailout from the euro area and the IMF. The unemployment rate reached a record 27.4 percent in the first quarter. Joblessness has more than doubled since bailout funds started flowing in May 2010.
IMF staff said in a report recently that Greece will probably need more money and debt relief to meet the aid program’s targets. The fund’s staff said 4.4 billion euros ($5.82 billion) of financing has yet to be identified next year under the rescue package.
Stournaras brushed aside concerns that the IMF may pull out of the Greek rescue program if a funding gap that IMF inspectors believe will open in August 2014 is not filled, saying “the IMF will stay in – this is the understanding.” Greece’s lenders have buckled every time there’s a threat Greece could be pushed out of the Eurozone, throwing more money into the country to stave off a default that could rattle markets and bring down the financial bloc, Greece’s best bargaining chip.
“The greatest concern is to produce a primary surplus this year and to come back to a positive growth rate next year,” Stournaras said. “These are the catalysts to finding solutions to the remaining problems.” He didn’t offer any, however.
Stournaras also played down German reactions ahead of federal elections in the autumn to the possibility of a further write-down of Greek debt, saying that “the German election is not our concern either.”
“There’s no Plan B,” Greece’s finance chief said. “Everything has been agreed in the Eurogroup. All the necessary ingredients are there, we have a very good working relationship with the Troika … I do not envisage any problems at the moment… If and when Greece produces a primary surplus, the Eurogroup will take appropriate means to reduce the debt even further if this is needed.” Critics said he’s spinning the dilemma.
Asked how Greece’s coalition government would withstand the need for further austerity measures “if the numbers don’t add up,” Stournaras said that the “government has a comfortable majority.”
Prime Minister Antonis Samaras, the New Democracy Conservative leader, is ruling with the PASOK Socialists but together they have only a five-vote majority in the 300-member Parliament and Stournaras said recently he’s worried some government MP’s might break away if they are asked to deliver more punishing measures on an angry electorate.
He added, however, that “further austerity is not the solution to the problem. The problem is to combine further fiscal adjustment with growth.” He didn’t say how that would happen, however.
“We are trying to improve the tax collection mechanisms and to complete the remaining structural reforms. In terms of fiscal adjustment we have covered two-thirds of the distance,” Stournaras said. “The main concern is to implement what needs to be done… to continue on the road we have designed,” he added, although the Troika said Greece has failed to go after tax cheats despite three years of pressure.
Stournaras was also upbeat about Greece’s privatization program, saying that the the targets for 2013 and 2014 “will be met,” though conceding a delay in the sale of the public gas company DEPA, which didn’t get a single bidder and with the Troika reducing the goal for revenues to be raised through selling or leasing state enterprises and properties by more than a half.
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