Greek Prime Minister Antonis Samaras said his two-year 11.5 billion-euro ($14.7 billion) package of spending cuts contains unfair and painful decisions that are necessary to restore credibility and keep the country in the euro area.
“The truth is Greece came very close to exiting the euro,” Samaras said today in a speech in Thessaloniki, northern Greece. “Greece would die. We had to avert this immediate threat. To regain credibility as a country we had to move ahead with and honor our commitments.”
Inspectors from the euro area, European Central Bank and International Monetary Fund begin judging planned budget cuts and those already implemented tomorrow to determine whether the country can receive funds allocated under a second international rescue. The 31 billion euros due will mainly go to recapitalizing banks to boost liquidity in a cash-starved economy in a fifth year of recession.
Lenders to Greece held back on loans pledged under two rescue packages totaling 240 billion euros in the wake of inconclusive elections in May and June, which derailed reforms, halted state-asset sales, and stoked concerns about the nation’s future in the 17-nation euro, spurring Greeks to withdraw their savings from banks.
Samaras said the plan unveiled this week by European Central Bank President Mario Draghi to reduce interest rates for struggling euro-area nations showed that it is better for Greece to remain in the euro.
“Draghi’s decision the day before yesterday shows that the solution for a modern and credible country, for every country of Europe, is in the euro,” Samaras said. “Staying in the euro and regaining credibility is the fight we are fighting now. If we left the euro, pensions wouldn’t be cut; they simply wouldn’t exist. There would be no spending on medicine. Petrol wouldn’t be more expensive: it would be rationed.”
The inconclusive May 6 ballot and the June 17 vote that brought Samaras to power gave gains to the Syriza party, which opposes the country’s bailouts from the EU and IMF even at risk of ditching the euro. Syriza is now Greece’s biggest opposition party.
Samaras’s coalition is made up of his New Democracy party, the socialist Pasok party and Democratic Left, giving him 179 seats in the 300-seat parliament. The leaders of those parties will meet tomorrow on the budget package, after Finance Minister Yannis Stournaras briefs the so-called troika of inspectors on the package.
The Pasok and Democratic Left parties have criticized some of the decisions Stournaras has made in drafting the package, saying indiscriminate wage and pension cuts must be avoided.
Most of the savings will come from reduced pensions, wages and benefits, according to a document obtained by Bloomberg on Aug. 31. Samaras said today that some of those decisions may be reversed once the economy returns to growth.
Greece has to reduce its budget deficit to 7.3 percent of gross domestic product this year from 9.1 percent in 2011, and cut its primary deficit, which excludes interest payments, to 1 percent from 2.4 percent under the bailout terms.