Greece Upbeat As Debt Crisis Eases
Debt-hobbled Greece may see a slightly milder than expected recession this year and aims to issue bonds again on international markets in 2011, the finance minister said Monday.
George Papaconstantinou said efforts to slash the gaping budget deficit from 13.6 in 2009 to 8.1 percent of gross domestic product in 2010 are well on track.
“We believe we will attain and perhaps exceed the target of 8.1 percent at the end of 2010,” Papaconstantinou said. Athens has committed to bring the deficit under three percent of annual output in 2014.
Papaconstantinou told a press conference that initial forecasts of the recession-bound economy shrinking by four percent of GDP this year now appear “excessively pessimistic.”
“The drop was 2.5 percent in the first quarter, and our first indications for the second quarter show the figure at around three percent,” Papaconstantinou said. “Based on that, and knowing that there may be a worsening in the third quarter as many of the (austerity) measures kick in, we are in a position to believe that the year will end somewhat better.”
The economy is expected to start expanding again in 2012. Analysts fear protracted recession, combined with harsh austerity measures, could endanger the center-left government’s ambitious deficit-cutting program.
Greece’s abrupt upward revision of its budget deficit last year — coupled with a euro300 billion ($376 billion) public debt — shocked the country’s EU partners and the international markets Athens depended on to finance its spending.
Subsequent credit downgrades and spiraling borrowing costs effectively shut Greece out of issuing new debt, and the country only avoided defaulting on its loans in May with the first installment of a euro110 billion EU and International Monetary Fund bailout package.
In return, the government cut pensions and public sector pay, increased consumer taxes and heralded sweeping pension and labor reforms — angering labor unions which have held five general strikes this year. A sixth is scheduled for Thursday.
Papaconstantinou said the gradual mending of Greece’s finances should improve its image and help it start issuing government bonds again on international markets earlier than anticipated. He said the government plans to initially test markets again with a treasury bill sale later this month, when some euro4.5 billion ($5.64 billion) in three-, six- and 12-month debt expires.
“We do not count the treasury bills in July as a return to international markets,” Papaconstantinou said. “It is a simple management of our debt. We hope to return to the markets some time in 2011, although we had the option of doing so until the beginning of 2012, but that will depend on the situation reverting to normal.”
He said a second, euro9 billion ($11.28 billion) installment of the EU/IMF rescue loans is expected by mid-September, with another 10 installments to follow.
ATHENS, Greece (AP)