Greece Nears Finance Fix After Passing Austerity Budget
European leaders were set to ease Greece’s financial pain and recommit to keeping it in the euro after the Athens government delivered an austerity budget for 2013.
European and International Monetary Fund experts provided a positive verdict on Greece’s prospects, clearing an obstacle to a 31.5 billion-euro ($40 billion) aid payout that’s been on hold since June.
“The overall orientation that’s emerging from the preparatory work is such that the next disbursement to Greece should be organized in the best possible way,” Luxembourg Prime Minister Jean-Claude Juncker told reporters in Brussels before chairing tonight’s meeting of euro finance ministers.
Renewed efforts to keep Greece’s economy afloat coincide with concerns over Spain and Cyprus, with the crisis management clouded by forecasts that the broader 17-nation economy will virtually grind to a halt next year.
Finance ministers won’t make “definitive decisions” at the meeting starting at 5 p.m., Juncker said. He added that he was “quite impressed” with Greece’s economic-overhaul package and last night’s passage of the 2013 budget by a 167-128 margin in Parliament.
Greece reported today that it beat its deficit target for the first 10 months of 2012, narrowing the gap to 12.3 billion euros from 21.1 billion euros. The goal was 13.6 billion euros.
While the next aid disbursement won’t be certified tonight, the ministers will find a workaround to prevent Greece from defaulting on a 5 billion-euro bill redemption on Nov. 16, a European official told reporters in Brussels on Nov. 9.
No date has been set for final clearance of the installment. Greek Prime Minister Antonis Samaras is pressing for an two extra years, until 2016, to meet deficit-reduction goals and euro governments are mulling options for filling the financing gap that would result.
The current target is to reduce Greek debt to 120 percent of gross domestic product by 2020. The European Commission last week put the ratio at 188.9 percent in 2014, up from 176.7 percent this year.
The European official said a decade is now the rough timetable for making Greece’s debt “sustainable,” suggesting an extension to 2022 or 2023.
Europe’s handling of the crisis is being colored by a deteriorating economy in the northern creditor countries, with export-driven Germany becoming less resistant to the contraction gripping southern Europe.
The commission last week cut its forecast for German growth in 2013 to 0.8 percent from a 1.7 percent forecast in May. The result will be near-stagnation across Europe, with the overall euro economy eking out growth of 0.1 percent, down from a May forecast of 1 percent.
Spain and Cyprus will figure only on the margins tonight, officials said. Immediate pressure on Spain has abated in the wake of a pledge by the European Central Bank to buy the bonds of hard-hit countries as long as they submit to economic conditions.
ECB President Mario Draghi said last week that the central bank stands ready to unleash the program. Spain has already secured a 100 billion-euro package to fix its banks and Prime Minister Mariano Rajoy is trying to avoid having to fall back on additional aid.
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