FRANKFURT (MNI) – Lower sovereign spreads will be required before
Greece can return to the debt market, Finance Minister George
Papaconstantinou told journalists Thursday.

The dependence of Greek banks on European Central Bank funding will
continue until market confidence returns, the minister conceded at a
press conference in the final leg of his whirlwind tour through London,
Paris and Frankfurt.

The Greek population knows that there is “no alternative” to the
aggressive fiscal consolidation currently taking place in the Hellenic
Republic, he said.

Sovereign spreads must be “certainly much lower than they are
today” for Greece to return to the market earlier than 2012, the
minister said, but he refused to mention a specific magnitude by which
they must decline.

Asked about domestic support for the drastic reform efforts
implemented by the government, Papaconstantinou said, “the Greek people
have shown remarkable resilience in what has been a very tough year.”

“It has not been easy for the Greek people, we are not trying to
sell things to the Greek people, but we are being straight with them,”
he said. The government has told the people that decisions being taken
are necessary to keep the country from going into bankruptcy, and “that
kind of straight talk seems to be convincing,” he added.

The minister rejected claims that there was “widespread” opposition
to the country’s reform efforts and emphasized that it was important to
distinguish between images seen in the media and the “general mood” in
Greece.

The objective of his roadshow this week was to show the
international community where things stand with the country’s reform
program. “The overall picture that comes out is one of a very strong
start, with the public deficit being reduced by E7 billion already in
August compared with the same period last year and being ahead of the
targets” in regards to deficit reduction, he asserted.

Deficit reduction is primarily due to underspending,
Papaconstantinou said, noting that there was some lag in revenues but
that is “not worrisome…I want to stress that what we are succeeding in
doing is an unprecedented fiscal consolidation.”

Furthermore, he said, “I want to stress that we are ahead of the
milestones in a number of important areas,” such as pensions. But he
acknowledged that “there is still a long way to go — there is no
question about it, but we are confident that we are meeting our targets
both in the short and medium term.”

Pressed on Greece’s banking sector and its dependence on ECB funds,
he said, “I think it is important to remember that the problem with
banks in Greece is a problem of the Hellenic Republic. It is a problem
of sovereign debt. The banking sector is fundamentally sound.”

He said the dependence of Greek banks on ECB funding “will stay
there, and the interbank markets will remain closed until confidence
returns. And for confidence to return the deficit must go down.”

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