Last major austerity package, says eurozone official

Head of Euro Working Group says funding and debt sustainability should not cause undue concern

The economist at the heart of eurozone negotiations, Euro Working Group president Thomas Wieser, has told Kathimerini that Greece will not need another major austerity package like the one it will be implementing next year unless the adjustment process is derailed by adverse domestic developments.

Wieser, who heads the group of technical experts that advise finance ministers and leaders, believes that some 9 billion euros in spending cuts and tax hikes next year will represent the last consolidation package of such size.

“Greece will not need another big austerity package because the bulk of the consolidation measures needed have already been taken,” he said.

Wieser emphasized, however, that if budget targets are not met next year due to slippage on the government’s part, rather than a deeper-than-expected recession, then the automatic mechanism Greece has agreed with its lenders will apply and more cuts will be made.

The government has agreed to implement some 9 billion euros over the 2014-16 period as well.

Wieser also played down concerns regarding a funding gap in the Greek program and about whether public debt will be viable at the end of it.

The Austrian said that Greece’s eurozone partners and the International Monetary Fund have ensured that Athens will be fully funded until the end of 2014 and that if there is a need for more financing to be found, that will be discussed next year.

With regard to debt, which Greece’s lenders want to reduce to 124 percent of GDP by 2020, Wieser said that an official sector haircut will not be needed.

“Greek debt will be reduced to the level of Irish debt today and to the level of Italian debt for many years,” he said. “I do not hear, though, anyone asking for a haircut on Irish or Italian debt. Some people insist Greece needs it for their own reasons, others because they want to make money, others because they want to avoid the reforms the country has to make.”

Wieser identified entrenched interests in Greece that might resist the reforms the government wants to make as they biggest threat to the country’s adjustment program.