Sa­ma­ras: We can ride out mar­ket tur­bu­lence and quit bailout

Financial Mirror (Cyprus) - - FRONT PAGE -

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?”

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