Euro chiefs set to grant Greece extension amid squabbles
Euro-area finance chiefs may cut Greece some slack in meeting its bailout targets even as they split on whether the country needs another debt writedown and Greek politicians squabble over further austerity measures.
With Greece facing an unprecedented sixth year of recession, fellow euro- area governments are preparing to allow Prime Minister Antonis Samaras’s government “a somewhat flatter adjustment path” in achieving its deficitreduction goal, said Thomas Wieser, head of the group that prepares meetings of euro- area finance ministers.
The target of a primary surplus of 4.5 percent of gross domestic product “should 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,” Wieser said today in an interview with German radio station Deutschlandradio Kultur. “We’ve not taken any decisions, but it could be that it’s postponed by one or two years.”
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.
No extra funds from the member states would be required, since “it can be financed within the existing programs,” Wieser said. A debt writedown, or haircut, wasn’t discussed by deputies yesterday, he said.
Ministers will receive an update on the state of negotia- tions between the Greek authorities and the so-called troika of the International Monetary Fund, the European Central Bank and the European Commission, said Wieser.
“While the negotiations aren’t finished, they are quite close to the end,” he said. “The last steps to agreement are always the most difficult.”
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,” said Carsten Brzeski, a senior economist at ING Group in Brussels. “The decisive phase for Greece has started.”
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 Managing Director Christine Lagarde 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, the biggest country contributor to Greece’s two bailouts to date, 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.