Athens.- It is necessary for Greece to reach a rapid agreement with its partners, covering both the servicing of its current and long-term debt, the State Budget Office of the Greek Parliament said in its quarterly report on the Greek economy.
The report, covering the period from October to December 2014, said that it was both feasible and necessary for Greece to begin a new negotiation with its partners and creditors, without any illusions over the depth of changes that could bring.
More analytically, the report noted that budget revenues fell short of targets in the last few months of 2014 as Greek taxpayers seemed more exhausted and because of the impact of a pre-election climate which prevailed in the country. This led to a widening of the fiscal gap, with the new government beginning its term on a more unfavorable fiscal situation than expected.
“The new government must repay within the next two months loans worth around 4.0 billion euros and to refinance T-bills worth around 7.0 billion euros, while Greece will need 8.8 billion euros to meet its obligations towards European Central Bank, the IMF and other capital payments. It seems impossible to cover these needs without an integrated agreement with the country’s partners,” the report noted.
Greece’s borrowing obligations totaled 22.5 billion euros this year, mostly repayment of bonds held by ECB, repayment of loans to the IMF and other interest payment. The State Budget Office stressed that since access to international capital markets was prohibited at the time, Greece should seek a negotiation and agreement with its partners for debt servicing. The report noted that if no agreement was reached, Greece could lose 7.2 billion euros of loans from the IMF and the Eurozone, while the Greek government would not be able to participate through its banks in a QE program announced by the European Central Bank. The report said that the sum that could be drained from the QE could reach 30 billion euros (contributing largely to a goal of economic growth instead of austerity). Without an adjustment programme, the Greek government would not be able to use the sum of 11.4 billion euros, currently held by the Hellenic Financial Stability Fund. “
Taking these issues into consideration, the State Budget Office expects that “for economic and strategic reasons, the partners will not be adamant in their positions”. The memorandum could be revised, mostly to correct social injustices, enhance a protection net for poor people and restructure an informal framework protecting the wealthy part of the population. In this framework, the necessary level of primary surplus and some form of debt restructuring are negotiable,” the report stressed.
The State Budget Office recommended that the government refrain from using the “end of austerity” as a term since it was “a wrong message as it was not related with growth prospects”.