Euro chiefs set to grant Greece ex­ten­sion amid squab­bles

The Pak Banker - - Front Page -

FRANKFURT

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.

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