FM: Greece seeks ‘hon­est com­pro­mise’ in stand­off

Kuwait Times - - BUSINESS -

Greece wants to end a stand­off with its len­ders through ‘hon­est com­pro­mise’, its fi­nance min­is­ter said, in­di­cat­ing a will­ing­ness to give ground on re­form, but he warned that in­flex­i­bil­ity on their part could in­flame anti-estab­lish­ment sen­ti­ment in Europe.

Fi­nance Min­is­ter Eu­clid Tsakalo­tos said he an­tic­i­pated a deal could al­low the coun­try’s in­clu­sion in an as­set-buy­ing pro­gram of the ECB by the spring of 2017, al­low­ing Greece to then test mar­kets with a debt is­sue later in the year. Greece, which is on its third in­ter­na­tional bailout since cri­sis first hit the in­debted na­tion in 2010, is again at odds with len­ders on fis­cal tar­gets and the scope of re­forms re­quired to con­clude its lat­est re­view on bailout progress.

Euro­pean Union and In­ter­na­tional Mone­tary Fund mis­sion chiefs left Athens last month with­out a deal on key bailout re­view is­sues - in­clud­ing labour and en­ergy re­forms. Talks are be­ing held over tele­con­fer­ences un­til there is enough progress for di­rect talks to re­sume, prob­a­bly this week.

“The Greek ex­pres­sion is ‘put water into wine’. It’s not an ex­pres­sion I like, be­cause I wouldn’t like my wine wa­tered down, but you know what I mean, to reach an hon­est com­pro­mise,” Tsakalo­tos said in an in­ter­view. De­lays in sign­ing off on the bailout re­view, he ar­gued, could tem­per eco­nomic re­cov­ery, an early re­turn to mar­kets, and fur­ther deepen a view - al­ready en­trenched with the re­sult of ref­er­en­dums in Bri­tain and Italy - that Europe was out of sync with its cit­i­zens and was not solv­ing prob­lems.

“I can’t see the logic of re­turn­ing to uncer­tainty and de­lay,” he said ad­ding Greece was meet­ing its bailout com­mit­ments and was ‘con­struc­tively en­gag­ing’ with cred­i­tors. “We don’t go to the in­sti­tu­tions with “this is our stance, take it or leave it” we try to re­spond to their crit­i­cisms, when they have ob­jec­tions to the na­ture of our struc­tural mea­sures, and we are will­ing to dis­cuss all those is­sues in good faith.”

Eu­ro­zone min­is­ters want Greece to main­tain a pri­mary fis­cal sur­plus of 3.5 per­cent be­yond 2018, but have yet to spec­ify how long it should keep this up and have also left open the ques­tion of longer-term debt re­lief. Last week, they of­fered re­lief on short-term debt, which will even­tu­ally lop about 21 points off the coun­try’s mas­sive debt moun­tain now stand­ing at just un­der 180 per­cent of GDP, but did not out­line any medi­u­mor long-term debt re­lief mea­sures.

Both are im­por­tant fac­tors for the IMF in weigh­ing up whether it will join the present bailout pro­gram worth up to 86 bil­lion eu­ros. Ger­many, Europe’s pay­mas­ter, wants the IMF on board to add cred­i­bil­ity to the pro­gram. A 3.5 per­cent sur­plus re­tained post-2018, when the bailout pro­gram ends, im­plies a heav­ier tax bur­den and more pen­sion cuts for Greeks, who have been squeezed due to a deep re­ces­sion.

It’s an op­tion ruled out by Greece’s leftist-led gov­ern­ment which ar­gues the aus­ter­ity bur­den is al­ready crip­pling for a na­tion where one in four are un­em­ployed, and many house­holds rely solely on el­derly rel­a­tives’ pen­sions to make ends meet. “No gov­ern­ment would be able to leg­is­late more mea­sures to be im­ple­mented in 2019 and fur­ther. There is no eco­nomic sense in that and there is no po­lit­i­cal pos­si­bil­ity of them be­ing car­ried out,” Tsakalo­tos said. The IMF has said that with the cur­rent set of re­forms agreed with Athens, Greece will only reach a pri­mary sur­plus of 1.5 per­cent of GDP in 2018 and there­fore the euro zone should grant it more re­lief or Athens should im­ple­ment deeper cost-cut­ting.

With Greece’s euro zone part­ners in­sist­ing on a 3.5 per­cent sur­plus af­ter 2018, Athens has of­fered a half-way com­pro­mise of at­tain­ing a 2.5 per­cent sur­plus. Tsakalo­tos said his pro­posal re­mained on the ta­ble, though he said there had been no in-depth dis­cus­sion of it at the Eurogroup meet­ing.

“The IMF - I’m very dis­ap­pointed with it - the IMF has said on count­less oc­ca­sions that it thinks that in the post-pro­gram pe­riod we should not have very high sur­pluses, that Greece can­not have more aus­ter­ity. “But in all hon­esty, I didn’t see them giv­ing any fight with the Euro­peans on re­duc­ing the fis­cal sur­plus,” Tsakalo­tos said.

The pres­sure, he said, seemed to be ap­plied only on Greece, and not those who were stalling on a bet­ter deal on debt, an in­di­rect ref­er­ence to Ger­many’s ret­i­cence. “What we want is an IMF that fights on two fronts,” he said. “Mov­ing from 3.5 per­cent to 2.5 per­cent had “hardly any cost to the man out­side Lidl in Ham­burg,” Tsakalo­tos said, re­fer­ring to the Ger­man dis­count store chain. It would, how­ever, im­pact sen­ti­ment, he said. “Be­cause it will be a more sus­tain­able pro­gram, peo­ple will be­lieve that there is light at the end of the tun­nel and I think that’s very im­por­tant for both Ger­many and Greece.”

Tsakalo­tos said he an­tic­i­pated the present re­view could be wrapped up by Jan­uary, ad­ding the ECB may need fur­ther clar­ity on how Greece’s debt would be han­dled for the longer term in weigh­ing up its in­clu­sion in the as­set-buy­ing QE pro­gram. The ECB has ex­tended the pro­gram un­til the end of 2017. —Reuters

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