Greece's Papandreou: no new austerity measures


The prime minister assured the country Sunday that further sacrifices are not needed and ruled out any restructuring of Greece's national debt.

(Wall Street Journal, Sydney Morning Herald, Deutsche Welle - 13/09/10; Reuters, AP, AFP, Bloomberg, FT, Market Watch, New York Times, Guardian, Deutsche Welle, BBC, ANA-MPA - 12/09/10; Reuters - 11/09/10)


Greek firemen protest the government's economic policy during a rally at Thessaloniki's International Fair. [Getty Images]

Greek Prime Minister George Papandreou said on Sunday (September 12th) that his government has no intention of imposing new austerity measures, in addition to those already agreed on with the EU and the IMF in return for a massive bailout to stave off default.

"We will not need any new measures," he said during a news conference on the sidelines of the annual Thessaloniki International Fair.

He made the statement a day before a joint team of IMF, EU and European Central Bank (ECB) experts was due to arrive in Athens to review Greece's progress in implementing the conditions for the 110 billion-euro rescue package.

Papandreou said the country is on track to meet the structural reform and deficit reduction targets envisioned in the bailout ending in 2013, and that there are no plans to seek an extension of the programme.

"The faster we complete the major reforms in our country ... the sooner we will be able to exit these restrictions," the leader of the ruling PASOK party said. "That could even happen before 2013, provided we do well."

In return for the multibillion-euro loan package, Greece was asked to implement a number of painful measures, including tax increases, as well pension and public sector wage cuts. It also agreed to reduce its budget deficit to 8.1% of GDP this year, down from 13.6% in 2009.

"I have every confidence that, by the end of the year ... we will have achieved the 40% reduction of deficit," said Papandreou.

He acknowledged, however, the need to boost revenues, as the country still lags behind in meeting the set target, but indicated that media reports about a shortfall of around 3.5 billion euros are highly exaggerated.

"The [shortfall] in revenues is about 1.5 billion euros," he said. "But with the pace at which we are advancing and with the measures we have already taken, we are confident we will reach the goal we have set for 2010."

Budget figures released on Friday suggest that, despite various measures taken by authorities, tax revenues increased by only 3.3% in the eight months to August, well behind the 13.7% target for this year. On the positive side, however, public spending for that period fell by 12%, more than double the 5.8% target for end-2010.

A positive assessment from the IMF and European experts will allow Greece to receive a third, 9 billion-euro tranche of the 110 billion-euro bailout loan, before the end of this year.

Meanwhile, concerns about a potential Greek default, or that Athens will have to restructure its national debt of about 300 billion euros, have pushed up the spreads for Greek bonds on international markets. Continuing national strikes and protests -- some staged during the International Fair -- against austerity measures have only fuelled such sentiments.

Papandreou stressed on Sunday, however, that any restructuring of the national debt is out of the question, as it would be disastrous for the economy and the nation.

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"Debt restructuring would be catastrophic for the economy, credibility and our future ... we would be talking about the collapse of our banking system; it would be a tragedy for households," he told reporters in Thessaloniki. "We are not even discussing it."

He voiced confidence that the steps his government has taken thus far would soon lead to a more positive response from the international markets.

"I am confident that this confidence that is growing will have a strong impact on the markets" and would reduce borrowing costs, Papandreou said.

At the weekend, he also urged Greeks to work together to help the country recover from the economic troubles it currently faces.

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