Samaras Bolstered as Greece Aims to Wrap Up Troika Talks
Antonis Samaras won a round in his fight to stay in the euro.
The Greek prime minister got endorsements from German Chancellor Angela Merkel and European finance chiefs as well as signals that the country’s next aid payment was in the offing.
International inspectors known as the troika are back in Athens today after a pause that provided Samaras’s three-party coalition with backing to continue efforts to carve out 13.5 billion euros ($17.4 billion) of new budget cuts.
Merkel’s visit to Greece yesterday “proves that we are breaking an international isolation,” Samaras said at their joint press conference. “And this was due to our mistakes as well. The political power and image of a country corresponds to its credibility.”
Merkel, Europe’s most powerful politician, made her first trip to the country since 2007 almost a year after she initially raised the prospect of Greece exiting the euro and four months after Samaras defeated an electoral challenge by parties that advocated breaking the bailout deal.
“The key message to Greece was, ‘do your part and we’ll support you,’” said Riccardo Barbieri, chief European economist at Mizuho International in London. “This would have been unthinkable only two months ago. I think that the implication is that if Greece moves closer to the demands of the troika, Germany will support the new financing package.”
Since emerging in Greece in 2009, the debt crisis has frustrated policy makers and stunted the region’s economy. Spain is fending off asking for help and Cyprus is in talks for a lifeline, following Ireland, Portugal and Spanish lenders.
The German leader kept up pressure on Samaras to maintain the austerity required in exchange for a rescue worth 240 billion euros. In exchange, she repeated her desire to keep the country in the euro. They met as more than 25,000 rallied outside Parliament to protest against the German-led budget cuts that have deepened a recession heading into its sixth year.
“I want Greece to remain in the euro,” Merkel told reporters yesterday during her six-hour visit. “A lot has been done, much remains to be done.”
Hours earlier, finance ministers meeting in Luxembourg paired their encouragement with a demand that Greece commit to a list of 89 policy steps before an Oct. 18-19 leaders’ summit. A deal with the troika on the new package of cuts is needed to unlock a 31 billion-euro aid installment. Greece may ask for the 5 billion euros due from September to be added to the payment, Naftemporiki newspaper reported today, citing comments from Finance Minister Yannis Stournaras.
European Union economy chief Olli Rehn said policy makers intended to clear the release in the coming weeks.
Stournaras said late yesterday the payment would be made at some point in November.
“You build trust step by step plus Greece needs to have such meetings to market its own achievements,” said Lefteris Farmakis, a strategist at Nomura International Plc in London. “The visit itself has an independent positive symbolism of course -- it will be interesting to see in coming days signs of what may have taken place behind closed doors.”
Athens was the scene of protests on and around its main Syntagma Square as thousands of Greek citizens vented frustration over Merkel’s perceived role in the country’s economic misery. Some 7,000 police were deployed in the capital, with Merkel’s destinations cordoned off. Police said they detained 217 people and arrested 24. Unions are meeting today to consider whether to call a general strike on Oct. 18, Skai TV reported today, without citing anyone.
Election pledges of negotiating looser terms for the bailout and getting two more years to implement the accord with the so-called troika of international creditors -- the International Monetary Fund, the European Central Bank and European Commission -- have taken a backseat to demands from lenders that Greece show reform commitment.
That has left Samaras forced to balance demands from coalition partners, lenders and Greek voters.
New IMF forecasts put Greece’s debt at 182 percent of gross domestic product in 2013, up from an April forecast of 161 percent and making it harder to reach a target of 120 percent by 2020, which underpins funding for the country. The IMF also said the economy will shrink a sixth year, by 4 percent in 2013, compared with a forecast for no change in April.
The visit was “not a game-changer,” said Wolfango Piccoli, an analyst at Eurasia Group Plc in London. “At the end of the day the Greek government still has to push for 9 billion euros of savings in 2013. It will remain difficult for both Merkel and Samaras to rekindle the bilateral spark given their domestic constraints.”
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