Samaras: We can ride out market turbulence and quit bailout

Prime Minister Antonis Samaras said last week that Greece would ride out market doubts about whether it can survive without international support, telling Reuters he can lead his country out of a four-year bailout and not call early elections.

Samaras said Athens was talking with its lenders about what should happen if Greece succeeds in leaving its bailout programme by the end of December, a year ahead of schedule, as officials hope.

The leader of a fragile coalition sees one option as a credit line that the government could tap post-bailout should it fall prey to future market turmoil.

“We can now stand on our feet; we have the resources to come out of the programme, and we are preparing... in constructive cooperation with lenders for ‘the next day’, after we exit the programme,” Samaras said in the interview with Reuters.

But the details of any such credit line have yet to be negotiated - nor has Greece finished a review with its international lenders of the measures it has taken so far. It is far from clear whether lenders would offer funds without strict conditions for the country.

Samaras has been eager to tell voters that the pain of budget cuts imposed by outsiders is over after six years of recession. He also said Greece would not hold snap elections next year, a possibility that has worried investors who fear political instability might undermine reform efforts.

“Elections will be held in June 2016, at the end of the four-year parliamentary term,” he said. “Our new president will be elected early next year,” he added, referring to a parliamentary vote in early February to elect a new head of state.

The outcome of the presidential vote could, in turn, prompt an early national election, if Samaras does not get enough backing to push through his candidate. So far, the Prime Minister’s majority in parliament is well below that needed to win the vote, so he needs backing from opposition parties.

Samaras is gambling that an early bailout exit can revive his fortunes and lure independent lawmakers to his side.

The austerity measures imposed in exchange for a 240 bln euro bailout have been very unpopular, and Greeks say pension and salary cuts imposed by the troika of lenders have impoverished the population.

But before it can leave the bailout behind it, EU and IMF inspectors must return to Athens after the publication of the results from a euro zone-wide bank health check later this week.

Greece’s bank bailout fund has 11 bln euros in leftover money, which Athens can tap if it needs to cover any future funding shortfalls. But a three-day sell-off in the markets has again pushed Greece’s 10-year bond yields past 9% and sent shares tumbling to their lowest since July last year. Bond and share prices recovered somewhat on Friday, with 10year yields falling to 8% while the Athens stock index was up 7%.

The government says

it has no need

for more money, including some 9 bln euros that the IMF is to give it between January 2015 and March 2016. It therefore wants to quit the programme early.

But while Greeks see the IMF as the main author of the austerity measures of the past few years, many international investors see the Fund as the guarantor of future Greek creditworthiness.

One of the scenarios for Greece would be an Enhanced Conditions Credit Line (EECL), from the European bailout fund.

But even this would come with conditions, allowing the euro zone to retain control that the Samaras government doesn’t want.

Officials are hoping that they can come to a compromise, with the government’s own reform agenda as a guarantee of economic discipline, according to people close to the government.

Samaras told Reuters that Greece would stay on the path of “fiscal prudence and structural reforms ... as the ticket to economic growth”.

He added: “We have already paid a high price as a country for past mistakes. Wouldn’t it be totally unfair and contrary to any logic, if we had to pay a price again, only this time due to our success?”