Quid pro quo deal for Greece?

Ger­man law­maker, ECB of­fi­cial sug­gest EU would of­fer bet­ter re­pay­ment terms for more re­forms

Kathimerini English - - Business & Finance -

Europe is call­ing for more re­forms and a greater fis­cal ad­just­ment in or­der to of­fer Greece bet­ter con­di­tions for the re­pay­ment of its 110-bil­lion-euro bailout loan. At the same time, Fi­nance Min­is­ter Gior­gos Pa­pa­con­stanti­nou said a hair­cut would con­sti­tute a huge mis­take.

Pa­pa­con­stanti­nou had ex­pressed hope on Mon­day that Greece would se­cure more fa­vor­able terms to pay back its loan, and yes­ter­day Michael Meis­ter, the al­ter­nate head of the par­lia­men­tary party of Ger­many’s gov­ern­ing Chris­tian Demo­cratic Union, said this dis­cus­sion “is head­ing in the right direc­tion.”

How­ever, speak­ing to Reuters, the Ger­man law­maker added that “in or­der to ex­pect ad­di­tional help, Greece will have to show ad­di­tional re­forms.” The rea­son Meis­ter is ask­ing for ex­tra work from Athens is to limit the risk of a de­fault, sug­gest­ing that only then could the dis­cus­sion on re­duc­ing the in­ter­est rates for the 110-bil­lion-euro loan con­tinue.

Sim­i­larly, the vice chair­man of the Euro­pean Cen­tral Bank, Vi­tor Con­stan­cio, stated that for ru­mors about the re­struc­tur­ing of the Greek debt to stop, Greece will need to strengthen its fis­cal stream­lin­ing pro­gram. He added that “there are many peo­ple and bod­ies which take an in­ter­est in main­tain­ing those ru­mors. Some of them wish to profit, should there be a re­struc­tur­ing in the eu­ro­zone.”

Speak­ing to state TV chan­nel NET, Pa­pa­con­stanti­nou em­pha­sized that “a re­struc­tur­ing, hair­cuts on debt, would con­sti­tute a huge mis­take for the coun­try.”

The Greek min­is­ter added, “It would come at a very great cost and we would not ben­e­fit; we would stay out of mar­kets for 10-15 years; the wealth of Greek pen­sion funds would suf­fer write-downs; we would have prob­lems in the sys­tem and there­fore in the real econ­omy.”

He went on to sug­gest that growth means that Greek econ­omy will re­gain peo­ple’s trust and that does not come via a magic but­ton. Re­turn­ing to the mar­kets re­mains Greece’s ob­jec­tive.

It now ap­pears that the first bond is­sue will take place in June, but will likely concern di­as­pora Greeks, prob­a­bly in the United States.

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