Former Greek Prime Minister George Papandreou predicted that Greece will stay in the euro zone and that the austerity measures required by the nation’s bailouts might be eased.
“We can have some modifications to the program,” Papandreou said in an interview with Bloomberg Television. “Whether we can stretch out the fiscal adjustment for another year or so will take a little bit of pain out.”
Greece on June 17 will hold its second national election in six weeks, a vote that may determine whether the country stays in the euro area. The inconclusive May 6 ballot showed gains for parties, led by Syriza, that oppose terms of the country’s bailouts from the European Union and the International Monetary Fund.
Papandreou, 59, said some of the claims being made by Greek politicians about reneging on the budget-cutting accords should be taken with “a grain of salt,” and they are creating unrealistic expectations for overhauling the agreements. Papandreou said he hopes whoever wins the elections “acts responsibly,” and he didn’t predict the outcome.
Greece has “a few weeks” before its government runs out of money so this is “a make-or-break period,” Papandreou said. A Greek exit from the euro would result in hyperinflation and bank runs as well as lower growth and wages, he said.
Bloomberg Television’s Inside Track will air the full interview on June 11 at 6 a.m. in New York.
President Barack Obama said today it is in “everybody’s” interest for Greece to stay in the euro, and he warned Greece that its hardships will increase if the nation exits.
U.S. stocks rose, driving the Standard & Poor’s 500 Index to the biggest weekly gain since December, while oil and the euro fell as investors awaited weekend talks by European finance officials for news of a potential bailout of Spain.
The Standard & Poor’s 500 Index advanced 0.8 percent to 1,325.58 at 4 p.m. New York time, extending its rally this week to 3.7 percent. It had fallen as much as 0.6 percent today.
Oil for July delivery fell 72 cents, or 0.8 percent, to settle at $84.10 a barrel on the New York Mercantile Exchange. The euro weakened 0.5 percent to $1.2500 after Spain’s credit ranking was cut three steps by Fitch Ratings yesterday.
Spain is poised to become the fourth country in the 17 nation euro-area to require emergency assistance as the currency bloc’s finance chiefs plan weekend talks on a potential aid request to shore up the nation’s lenders.
“We have to find a way to recapitalize the Spanish banks,” Papandreou said. Politicians must make “decisions in time to calm the market,” and “can’t be behind the curve this time.”
Papandreou, whose father founded his Socialist Pasok Party in 1974, stepped down as prime minister in November and helped put together a new government to bridge differences with European Union leaders and officials after his proposal of a referendum on the terms of Greece’s second European bailout roiled markets.
“I did all that I could do,” Papandreou said, adding the “personal costs” were “worth it” to serve his country. “Now it’s up to the next government to take this package and run with it.”