Greece’s international creditors return to Athens today to assess how far from bailout terms the country has strayed as Prime Minister Antonis Samaras warned of a deepening recession as he fights to stay in the euro.
Samaras will meet with European Commission President Jose Barroso in Athens this week before seeing the “troika” of officials representing the euro area, the European Central Bank and the International Monetary Fund on July 27. That will be a day after Finance Minister Yannis Stournaras outlines budget cuts for 2013 and 2014, an endeavor some German officials say may mark the end of Greece’s stay in the euro area.
“This government is here to keep Greece in the euro,” Samaras told lawmakers in Athens today. “We will meet the bailout goals, because they are also our goals. But some recessionary elements in the bailout must change if we are to meet those goals.”
Samaras must detail 11.5 billion euros ($13.9 billion) of measures to restore credibility to receive funds pledged under two rescue packages totaling 240 billion euros. Greece risks running out of money without the disbursement of a 4.2 billion-euro payment that was due in June as the first part of a 31 billion-euro transfer.
Samaras said the economy could sink even more than 7 percent and that he aimed to slow that course within the year, and return to growth in 2014. He aimed to reduce unemployment, now at 24 percent, to 10 percent in four years’ time. He’s fending off pressure to impose more budget cuts this year.
Two elections in six weeks derailed reforms, halted state-asset sales and sparked concerns about whether the country can remain in the 17-nation euro bloc.
German Vice Chancellor Philipp Roesler told broadcaster ARD on July 22 that he is “very skeptical” Greece can be rescued and that the prospect of its exit from the monetary union “long ago lost its terror.”
“Statements by members of the German government at the weekend suggest that support for a renegotiation of the Greek program is far from guaranteed,” Riccardo Barbieri, chief European economist at Mizuho International Plc in London, wrote in a note today. “There is a feeling that the German government may be pushing for a Greek exit from the euro.”
The inconclusive May 6 ballot and the June vote, which Samaras’s New Democracy won by less than 3 percentage points, gave gains to Syriza, a party that opposes the country’s bailouts even at the risk of ditching the euro.
Syriza leader Alexis Tsipras kept up the pressure on Samaras yesterday, saying the government’s compliance with the program would lead to bankruptcy and an exit from the euro. Civil servants will walk off the job at midday and are planning a protest today in central Athens.
“Significant” delays in the program and a sinking economy require special steps to ensure Greece can redeem two ECB bonds next month, Stournaras said on July 10. The two Greek bonds on the ECB’s books total 3.1 billion euros and mature on Aug. 20, data compiled by Bloomberg show.
Thomas Wieser, the head of a group of senior officials that prepares meetings of euro-area finance ministers, said in an interview on Austrian radio ORF today, that the troika has to assess how far behind Greece is in its program to cut debt and return to growth, and that decisions will have to be taken afterwards. He said the questions to be tackled “are political decisions by the euro zone needed, or can it be done by a simple adaption of the program?”
“Only once the troika files its report, which will probably be in September, can we continue to talk about how to proceed with the disbursements,” said Wieser. He said Roesler was isolated in his view that Greece could be allowed to leave the euro currency. “I hear from all other politicians that the integrity of the euro area isn’t put into question.”
Samaras is trying to avoid the across-the-board pay and pension cuts that have driven the country into the worst recession since World War II. He’s promised more state-asset sales to pay down debt and help finance an additional two years to bring the economy back on track.
Greece has to reduce its budget deficit to 7.3 percent of GDP this year from 9.1 percent in 2011. With the economy shrinking more than forecast, Stournaras has said the goal is to reach the nominal target of 14.8 billion euros for this year’s deficit, not the ratio.