After a meeting in Washington, D.C., with International Monetary Fund chief Christine Lagarde, one of Greece’s Troika of international lenders, Prime Minister Antonis Samaras, the New Democracy Conservative party leader, again began fishing for a debt cut he said that the country needs because it can’t pay back $325 billion in two rescue packages.
Lagarde backs the idea of the Troika’s other two partners, the European Union and European Central Bank – but not the IMF – taking big losses on the loans because the Greek debt, now at about $430 billion despite ongoing aid, is unsustainable.
In 2011, when current Deputy Prime Minister/Foreign Minister Evangelos Venizelos was finance minister in a PASOK Socialist administration, he imposed 74 percent losses on private investors, driving the country out of the markets and nearly wiping out many bondholders in the Diaspora.
Citing a pledge made in November by euro-area nations to consider further assistance to lower Greece’s debt, Samaras said his country is on track to meet the main condition, an annual budget surplus before interest payments, or primary surplus, if you don’t count interest, social security costs, some military budgets, state enterprises and municipal budgets, which otherwise would show a huge deficit.
“If Greece indeed does manage to have primary surplus, then the European Union should help and will help Greece,” Samaras said at the Peterson Institute for International Economics in Washington. “What is important to me is not to procrastinate too much for a solution.”
Greece is in the sixth year of a recession that was worsened by harsh austerity measures attached to the bailouts. Acknowledging the conditions made the problem worse, the lenders nonetheless insisted on more. Most of the country’s debt is now in the hands of the Troika and Greece doesn’t want to pay it back.
That would force taxpayers in the other 16 countries of the Eurozone to pay for decades of wild overspending by PASOK and New Democracy administrations who packed public payrolls with hundreds of thousands of needless workers in return for votes, and now are being charged with getting rid of 40,000 of them in new reforms.
Without a debt cut, Greece may need more aid – which would come with more austerity, the IMF said, forcing Samaras to break his promise not to impose more pay cuts, tax hikes, slashed pensions and worker firings on beleaguered Greeks.
“As to how we’re going to lower the debt, that’s another issue,” Samaras said when asked if that would come in the form of longer maturities and lower interest rates, or a write-down. While Greece also wants lower interest and more time to pay back the loans as one option, the government has set aside a plan that would give the same benefits to indebted Greek households and is moving to let banks seize their homes in foreclosures.
Samaras said his talks earlier in the day with Lagarde were “fruitful,” generally considered diplomatic buzz talk to mean nothing happened. He also met with the financial community, touting his country’s fiscal progress which he said will lure investors and boost exports. “We are not there yet, but the ship is turning around,” he said.
Lagarde said, “Prime Minister Samaras and I had a productive discussion this afternoon on recent economic developments and challenges facing Greece,” without explaining what that meant.
She added: “I commended him on the progress that Greece has made under its economic program towards fiscal sustainability, restoring competitiveness and financial stability, and stressed the importance of moving forward on institutional and structural reforms and implementing a robust 2014 budget to achieve the program’s objectives.
“I assured him that the IMF remains committed to helping Greece in this endeavor,” she said, without giving any details.