Greek Finance Minister from IMF meeting in Washington reiterates government’s decisiveness to proceed. Ex-PM Simitis says Greece should restructure debt.
Washington, DC.- Greek Finance Minister George Papaconstantinou on Saturday denied rumors that Greece would restructure its massive debt as it follows an EU-IMF rescue program.
“There is no such discussion,” he stressed, adding that “won’t go through a restructuring exercise is because the pain and the cost is bigger than the benefit.”
Acknowledging a drop in Greek government bond prices this week on rumors of an imminent debt restructuring, Papaconstantinou said: “There’s a lot of turbulence at the moment.”
“Any increase in interest rates may be driven by concerns about inflation…It has effects on borrowing costs, there’s no question about that. However, do bear in mind that Greek borrowing costs, the part, the increase in interest rate is very small. The biggest part has to do with the spread. If market confidence returns, this will more than outweigh any increase in interest rate costs.”
But as the Greek government follows the program required by the 110-billion-euro ($147.8 billion) EU-IMF bailout to escape a default on sovereign debt, he said, “I think the situation will improve and we will be able to return to the markets.”
“By the end of 2011 we will turn the corner,” he said, adding: “This is not just wishful thinking; we are seeing some very encouraging first indicators that we’re nearing a turnaround. … There’s still a lot of hard work ahead. We’re starting to turn a corner and this is very positive.”
Papaconstantinou defended the government’s determination to proceed.
“No one should mistake the willingness of the government and its determination to pursue a very difficult work,” he said.
Challenged on his government’s ambitious privatization plans, Papaconstantinou insisted that in the present case, “the assets that are on the table are the right assets,” the market conditions are right for finding buyers, and the political will to push through the privatization is strong.
“So I’m not being an optimist, I’m being a realist” about the privatization program, he said.
“We want to front load the programme. We will go through an open tender process.”
Papaconstantinou met on Saturday with U.S. Secretary of Treasury Timothy Geithner. Papaconstantinou said that Geithner was supportive of Greece’s efforts to trim government spending and boost taxes to put the country on a firmer financial footing.
Secretary Geithner also held talks with finance officials from the European Union as well as Portugal. Geithner’s meeting with Portuguese Finance Minister Teixeira dos Santos reviewed that country’s recent decision to seek financial support from the European Union and the IMF, the Treasury said in a statement.
Yesterday, George Papaconstantinou met with IMF’s Managing Director Dominique Strauss-Kahn. On Saturday, the International Monetary Fund rejected reports that it believes Greece should restructure its massive debt. An IMF spokesman denied reports by The Wall Street Journal/Dow Jones that the IMF believes Athens’ debt situation is unsustainable and must be restructured within the next year.
Managing Director Dominique Strauss-Kahn told reporters Saturday in Washington that so far the IMF is ‘working with the programme as it has been established.’
‘We have built the Greek programme, with the government, following the assumption that they really want not to restructure their debt. That’s the hypothesis around which the European programme and our support of the programme was built. Nothing has changed, period,’ he said.
“The market can talk for hours…” about all kinds of things, he added.
“So far we are working with the program as it has been established. For this program to work, we need two things. We need the country to do exactly what is in the program, even if it is difficult,” he said.
“And we need the other partners, in this case namely the Europeans, also to do their homework,” he said, pointing to the European Union’s efforts to provide financing. “That’s it.”
Earlier this week, Strauss-Kahn expressed confidence that Greece is on the right course to economic recovery, provided it has the continued help of the rest of Europe and the IMF.
With a debt burden of around 340 billion euros, Athens is struggling to cut its spending and boost revenues, even as its borrowing costs mount in debt markets.
On Friday Prime Minister George Papandreou outlined a 26-billion-euro roadmap by 2015 to keep foreign creditors at bay. But remarks out of Germany, Europe’s most powerful economy, which is contributing about 20 percent of the Greek bailout, continued to make waves.
Athens’s bond rates soared Thursday and Friday after comments by the German finance minister, Wolfgang Schaeuble, in a Die Welt interview reignited rumors of a restructuring.
Asked if he had encountered his German counterpart at the Washington meetings, Papaconstantinou said: “I did not see my friend Mr. Schaeuble but we talk a lot.”
Schaeuble, for his part, separately told reporters: “We have a close relationship and enough common problems.”
At a press conference, Papaconstantinou also pointed out that “there is also an official clarification of the German government that this is not the position of the government and it not the position of the Greek government and it is not the position of the institutions supporting the program. Full stop.”
SIMITIS PROPOSES DEBT RESTUCTURE
Greece should restructure its debt soon to help rebuild its economy, former Socialist Prime Minister Costas Simitis was quoted as saying on Saturday. There is growing speculation that the euro zone member will eventually need to restructure its debt, despite official denials, and that Germany, the European Union’s wealthiest member, is working on such a plan.
“A well-prepared restructuring will essentially improve our situation,” Simitis told To Vima newspaper in an interview. “As long as it is being delayed, the debt which cannot be restructured gets bigger.”
Simitis, chief architect of Greece’s entry into the euro in 2001, was expelled from the Socialist PASOK parliamentary group in 2008 for publicly attacking party leader George Papandreou’s call for a referendum on the EU’s Lisbon Treaty.
“The next 15-20 years should be a period when we rebuild a stable economy with optimism and rejoin European developments and not a period of misery when we will be living at the mercy of the world economy’s wobbles,” Simitis added.
But he stressed that a debt restructuring would not be a panacea, saying Greece should stick to the terms of an EU/IMF bailout and respect EU treaty rules on public debt and budget deficits.
Another Greek newspaper, Kathimerini, quoted unidentified European Commission on Saturday as saying Greece had already raised the issue of extending the maturity of its debt held by private creditors to its EU and IMF lenders. The EU executive and the ECB rejected its proposal for fear such a move would hurt other European economies, the paper said.
A poll published on Saturday showed the ruling Socialists’ support declined slightly from last month, but they still enjoy a lead over conservative opponents despite unpopular austerity.
Public Issue’s poll for Kathimerini showed backing for PASOK stood at 33.5 percent versus 27 percent for the opposition conservatives.
According to a Kapa Research poll conducted for To Vima and also released on Saturday, some 21.7 percent of Greeks would vote for PASOK, if elections were held now, versus 20.1 percent for the main opposition New Democracy party.
That poll also showed 41.5 percent of respondents believe a debt restructuring is likely to happen in the next two years.