Stournaras Says Greek Recovery May Begin by End-2013
Greek Finance Minister Yannis Stournaras, appointed in June as Greece grappled with political turmoil that threatened to tip it out of the euro, says the economy could begin recovering by the end of this year as investors and depositors regain confidence in the country.
“The most important driver is the reduction of the fear that Greece will leave the euro,” Stournaras told Bloomberg Television’s David Tweed in an interview in Athens yesterday. “This is the catalyst. Now most people believe that Greece will stay in the euro so people are bringing back their money from mattresses, from abroad to their bank accounts.”
Greece’s economy, which has lost a fifth of its output since 2008, is in the sixth year of a recession after pensions and wages were cut and taxes raised to avert the euro area’s first financial collapse. A turnaround could appear on a monthly or quarterly basis toward the end of this year, Stournaras said. He agreed with an International Monetary Fund forecast of a return to annual growth of 0.6 percent in 2014. The Washington- based lender expects Greece’s economy to contract 4.2 percent this year.
In November, Stournaras secured two extra years until 2016 from euro-area peers to meet European Union and IMF budget- reduction targets. That came after Prime Minister Antonis Samaras’s three-party coalition government fought for and secured parliamentary approval for a 13.5 billion-euro two-year package of budget cuts demanded by international lenders in return for funds that would keep the country solvent and in the euro area.
Euro region finance chiefs agreed in December to pay Greece 49.1 billion euros through March after revamping the nation’s second rescue. That released funds frozen since June as opposition to pension and wage cuts amid surging unemployment peaked, leading to a political deadlock in elections in May.
The IMF is contributing a separate amount to Greece of about 3 billion euros this quarter.
Stournaras, 56, said there was “ample market evidence that confidence is coming back,” pointing to an increase in bond prices and inflows of deposits to banks. Greek bank deposits increased the most in five years in December.
Still, he said, 2013 will be “a very difficult year”, underscoring investor concerns that social unrest could resume. Samaras on Feb. 5 used an emergency decree to order striking seamen back to work, the second time in as many weeks the government opted for the rare move to break up industrial action. A general strike has been called for Feb. 20.
“We have cut wages, we have cut salaries, taxes are up so this is going to be a very tough year,” he said. “Farmers are in the streets, seamen are in the streets. We’re trying to do our best.”
Stournaras, an Oxford-educated economist and former chief executive officer of Emporiki Bank SA, said he wasn’t alarmed to receive a bullet in the mail at the Finance Ministry earlier this week. He spoke in his office opposite the Parliament in Athens, the scene of three years of demonstrations and protests against austerity measures. A bullet hole is visible in one of the windows of his office.
Locked out of markets since April 2010, the country is the only nation to receive two bailout packages from the euro area and IMF, accounting for half of the 486 billion euros in bailout commitments to the countries sharing the currency who have sought help.
In return for the funds, the government needs to deliver on pledges to overhaul its economy, sell state assets and lower state employee staffing levels by 2015. Stournaras said the sales under way of the natural gas company Depa SA, which has drawn interest from OAO Gazprom, and gambling company Opap SA were the most important.
Greece has to deliver on state asset sales to cut a debt mountain that will peak at 179 percent of gross domestic product this year and threatens the continued payment of funds from the IMF. European leaders have cut rescue-loan interest rates for Greece, suspended interest payments for a decade and given the troubled nation more time to repay, while it carried out a bond buyback last year.
Any further debt relief is “welcome whatever it is,” Stournaras said. “I would welcome a further reduction of interest rates,” he said. “We don’t want reductions which inflict damages to the counter parties.”
European Central Bank President Mario Draghi’s July pledge to do “whatever it takes” to preserve the euro has buoyed demand for European assets, with the euro gaining 2.5 percent against the dollar this year.
While that’s a sign of confidence in the common currency, Stournaras says he was concerned about the high level of the euro, even though that won’t crimp a rebound in Greek exports, which are mostly to other euro-area countries. Pre-bookings for the tourism season were “very good,” he said.
Stournaras said there was little scope to tweak the terms of a 50 billion-euro recapitalization plan for the country’s lenders in the face of calls from the banks for more attractive terms for private investors. He said that setting up a so-called bad bank to take on non-performing loans in the system wasn’t a priority.
Stournaras echoed statements from Samaras in 2012 that the latest batch of pension and wage cuts would be “the last”.
“Don’t forget that the IMF has done its self-criticism by saying that they have imposed too many measures on the Greek economy,” Stournaras said. “I don’t think that further austerity is a solution to the problem. We need now growth and privatizations.”
To contact the editor responsible for this story: Stephen Foxwell at email@example.com