–Adds Comments From Greek Finance Official On Finland Collateral Demand
WROCLAW, Poland (MNI) – Greece knows that it must immediately
implement the fiscal reforms it has promised its international lenders
without further distractions, Greek Finance Minister Evangelos Venizelos
told reporters here today.
“This is a big opportunity to send a clear message that we are on
the right track and we will implement the fiscal consolidation program,”
Venizelos told reporters on the sidelines of the Eurozone finance
ministers’ meeting here. “We must meet all targets for this year and the
next without delay, exceptions, or any kind of derailments, and we must
implement the [private sector debt exchange] program.”
Venizelos said it was all the more important that Athens now walk
the straight and narrow path, because there is “great mistrust” in
Greece from the outside. He said he told his fellow EMU finance
ministers at today’s Eurogroup meeting that Greece would meet its fiscal
targets for this year and next and achieve a primary budget surplus “as
soon as possible.”
The Greek government, he pledged, will expedite its planned
privatization plan and move quickly to further reduce spending, cut the
size of the public sector, liberalize the labor market, and boost
competitiveness.
However, a Greek Finance Ministry official, speaking anonymously,
complained that a demand by Finland for collateral in exchange for
additional aid to Greece was making it more complicated for Athens
implement the austerity measures.
He said the European Commission, the ECB, IMF and the head of the
European Financial Stability Facility (EFSF) all preferred to abandon
the idea of collateral, “but Finland insists so therefore we have to
find a legal framework.”
The problem, he noted, is that if Finland does get collateral,
countries like Austria, Slovenia, Slovakia and Malta will insist on
equal treatment. He said the Greek government continues to reject the
idea of real estate collateral and is now seeking some kind of
“financial solution” that would not trigger legal clauses attached to
Greek government bonds which prohibit special treatment for any subset
of creditors.
The collateral issue is one of the key obstacles delaying
implementation of a new E109 billion bailout plan for Greece, which was
the centerpiece of a package agreed on by EMU leaders at their summit on
July 21. The leaders also agreed to a significant increase in EFSF’s
authority to act as a backstop for other troubled Eurozone countries.
Venizelos said the Eurozone finance ministers, who met here today,
were in agreement that the July 21 package “must be implemented fully.”
He said this was important for the Eurozone as a whole and was
“particularly vital” for Greece.
Venizelos predicted that despite wrangling and resistance in some
national parliaments, the 17 member nations of the Eurozone would in the
end approve the proposed changes to the EFSF. They include allowing the
facility to buy sovereign bonds in the secondary market, thus relieving
the ECB of that duty; authorizing it to provide funds for bank
recapitalization, and to offer pre-emptive financing for countries like
Spain and Italy, which are under severe market stress.
Greece has been under increasing pressure in recent days to show
stronger signs of commitment to the conditions it agreed to as part of
the E110 billion bailout deal it signed in May 2010. The next tranche of
that bailout, worth E8 billion, has been held up by the Greece’s failure
so far to meet its deficit target this year.
Inspectors from the ECB, IMF and EU abruptly left Athens earlier
this month after discovering that Greece had not made progress on key
points of its reform program and was behind again on the deficit target.
The so-called troika will be back in Greece next week, and all eyes will
be on their mission to see if they put their stamp of approval on
disbursement of the E8 billion loan tranche.
However, senior European sources told Market News International
earlier this week that Greece’s Eurozone partners will agree to pay the
tranche even if Greece is not technically in compliance, because without
the money the risk of default is too high.
Venizelos said that a proposed debt exchange by Greece’s private
sector creditors was “going as planned,” despite widespread doubts
recently that the required 90% participation rate could be achieved.
MNI, citing a senior EU official, reported on Thursday that a
logjam on the debt exchange had been broken through political
intervention and that there was now a sense of optimism in official
circles that the 90% goal would be reached. The lion’s share of
participation in the debt exchange, in which banks would agree to take a
haircut averaging 21%, would fall on Greek banks, the official said.
However, Venizelos said today that the Greek banking system was
“completely secured.”
Venizelos also suggested that the current financial environment of
extreme uncertainty was partly responsible for a certain policymaking
paralysis in the Eurozone and for Greece’s difficulty in implementing
the agreed reforms.
“The international environment feeds the uncertainty and the
uncertainty affects the implementation of the Eurozone decisions and the
effectiveness of our policies in Greece, which aim to deal with the
crisis,” he said. “This vicious circle must be broken.”
However, another dose of uncertainty was injected into markets
earlier today — at least temporary — when a Greek media report made
the rounds quoting an official at the Greek statistical agency who
alleged that the country’s deficit figures had been falsely inflated in
order to give the government cover for the unpopular austerity measures
required as a condition of EU-IMF aid.
A spokesman for the European Commission refuted the report today,
saying that in the Commission’s view, Greek statistics “are reliable.”
–Angelika Papamiltiadou, a_papamiltiadou@hotmail.com
[TOPICS: M$$EC$,M$X$$$,MT$$$$,MGX$$$,M$$CR$]
