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.