Greek Finance Minister George Papaconstantinou suggested yesterday that the EU and the IMF give Greece more time to repay its bailout funds, and at a cheaper rate, to allow it to exit its severe debt crisis.
In an interview with French daily Liberation and published a day ahead of an inspection visit by the lenders, Papaconstantinou became the first Greek official to float the idea of a further easing of conditions on the 110 billion euro (US$163.3 billion) rescue.
The EU cut the interest rate and rescheduled repayments on the bailout in March to give Athens some breathing space.
Reiterating that Greece ruled out a restructuring of its debt, despite markets -increasingly betting it will eventually have to do so, Papaconstantinou said: “It would be better that we further lengthen the repayment schedule of the 110 billion euros that our partners have lent us and that we further lower interest rates. That way, we could meet our other repayments.”
A year after Greece’s euro zone partners and the IMF saved it from bankruptcy with a pain-for-gain bailout plan that required Athens to slash public spending and boost tax collection, Greece is struggling with a deep recession, weak revenues and skyrocketing yields on its bonds.
“There are people who think [a restructuring] is inevitable,” Papaconstantinou said. “But there are also those who have bet a lot of money on a Greek default. That’s what explains the ridiculous rumors of the last few weeks. There is no question of restructuring.”
One analyst said a further rescheduling of EU-IMF bailout repayments would not be enough to avoid a restructuring.
“I would argue that lengthening the EU loan and cutting the loan rate might be a necessary condition for Greece to comply with its budget targets, but not a sufficient one,” Unicredit analyst Kornelius Purps said.
Papaconstantinou said that Greece was headed for a return to economic growth in the second half of the year and should see a full year of positive growth next year, but noted it was too early to see an end to the country’s debt crisis.
“We are in the middle of the tunnel. Too far to see where we left from, which means that sometimes we forget that we had a narrow escape from default, and too far from the exit to be able to see the light,” he said.
EU and IMF officials start an inspection visit to Athens today to evaluate whether Greece has made enough progress on the bailout fiscal and reform targets to receive a fifth, 12 billion euro tranche of aid.
Eurozone leaders agreed at a summit in March to extend the maturity of bailout loans to Greece to seven-and-a-half years, doubling the repayment deadline. They also agreed to lower the interest on their bilateral loans to Greece by 100 basis points.
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