Bailout chal­lenges

The Pak Banker - - Front Page -

EURO-AREA fi­nance chiefs are likely to grant Greece some re­lax­ation in meet­ing its bailout tar­gets even as they split on whether the coun­try needs an­other debt write­down and Greek politi­cians squab­ble over aus­ter­ity steps.

As Greece fac­ing sixth year of re­ces­sion, euro-area govts are pre­par­ing to al­low Prime Min­is­ter An­to­nis Sa­ma­ras’s gov­ern­ment a some­what flat­ter ad­just­ment path in achiev­ing its deficit-re­duc­tion goal.

The tar­get of a pri­mary sur­plus of 4.5 per cent of gross do­mes­tic prod­uct could in the­ory soon be reached, but in view of the slump in the econ­omy we see that now as be­ing only very, very dif­fi­cult to achieve. Euro­pean pol­icy mak­ers are again seek­ing ways to keep Greece in the euro and avert an exit that for­mer Deutsche Bank Chief Ex­ec­u­tive Of­fi­cer Josef Ack­er­mann said on Oct. 29 would cost sev­eral hun­dred bil­lion eu­ros. Fi­nance min­is­ters are due to hold a con­fer­ence call at 12:30 p.m. Brussels time and may re­lease a state­ment after­wards. Min­is­ters will re­ceive an up­date on the state of ne­go­ti­a­tions be­tween the Greek au­thor­i­ties and the so-called troika of the In­ter­na­tional Mone­tary Fund, the Euro­pean Cen­tral Bank and the Euro­pean Com­mis­sion. While the ne­go­ti­a­tions aren’t fin­ished, they are quite close to the end. Euro­pean of­fi­cials are grap­pling over ways to fill Greece’s fi­nanc­ing gap two weeks be­fore a de­ci­sion is due on whether to give the coun­try a fur­ther round of emer­gency funds. While Ger­man Chan­cel­lor An­gela Merkel has sig­naled her de­sire to stand be­hind Greece’s euro mem­ber­ship, Sa­ma­ras’s coali­tion is still at odds over the steps needed to se­cure more money. Eu­ro­zone fi­nance min­is­ters hope to fi­nally strike a deal on giv­ing Greece more time for its ad­just­ment. Pol­icy mak­ers are try­ing to work out a plan that will cut Greek debt to 120 per­cent of gross do­mes­tic prod­uct by 2020 from about 144 per­cent now amid the worst re­ces­sion in a gen­er­a­tion. Fail­ure to hit the debt tar­get could see the IMF with­draw aid, spark­ing an­other wave of spec­u­la­tion about Greece’s fu­ture in the euro.

IMF chief has sug­gested that Greece may need an­other debt cut af­ter gov­ern­ments and banks ear­lier this year agreed to the big­gest re­struc­tur­ing in his­tory. Merkel’s gov­ern­ment op­poses such a move. At the same time, it has sig­naled it’s will­ing to con­sider an ECB pro­posal for a buy­back of Greek debt.

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