Friday December 19, 2014 Search
Weather | Athens
17o C
10o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
Samaras sweats as Germany holds back on debt relief

By Maria Petrakis

As Greek Prime Minister Antonis Samaras wins German praise for sticking with a bailout program while the economy crumbles, it’s not enough to pin down German support to lighten the heaviest debt load in the euro region.

German Finance Minister Wolfgang Schaeuble is holding Samaras to promises tied to 240 billion euros ($319 billion) of rescue funds. As unemployment hits a record, the Greek parliament adopted last week the final piece of a plan to put 4,200 state employees on notice for dismissal before euro partners signed off on this month’s 2.5 billion-euro payment.

With Greek 10-year bond yields six times Germany’s almost four years after the European debt crisis blew up in Athens, the country is still reliant on handouts. Chancellor Angela Merkel, facing re-election in September, is desperate to avoid another Greek debt restructuring and upsetting her taxpayers, who have contributed the most to the rescue.

“Greece needs debt relief to make debt sustainable, but this isn’t something that can enter the German election debate easily,” said Lefteris Farmakis, an analyst at Nomura International in London. “Germans will not accept haircuts. They prefer to grant a very long-term loan with a very low coupon than accept the need for a haircut on official loans.”

The yield on 10-year Greek bonds has dropped to 10.07 percent from as much as 11.49 percent a month ago when Samaras’s government was shaken by his decision to shut down the state broadcaster, leading a partner to abandon the coalition.

While that put the difference in borrowing costs compared with Germany at 8.40 percentage points, the spread was 6.71 percentage points on May 22, the narrowest since October 2010, as Samaras pointed to progress on meeting the bailout terms.

Schaeuble left the door open to relief on a visit to Athens on July 18 when he said “other measures” will be considered next year if Greece takes the steps required and achieves a surplus in its budget before interest payments.

The International Monetary Fund requires that Greek debt come down to below 124 percent of gross domestic product by 2020 to continue to provide financing for the country. The nation’s obligations will peak this year at 175 percent of GDP and begin to decline should Greece stick to the program of spending cuts and structural reforms, according to the troika of inspectors from the European Commission, IMF and European Central Bank.

The Greek debt burden is almost double the average of the 17-nation euro area, according to the European Union’s statistics office on July 22. First-quarter debt stood at 160.5 percent of GDP, while in the bloc, it was 92.2 percent.

Creditors have mooted cutting the rates on bailout loans and suspending interest payments, measures which have been used in the past. Most of the country’s 318 billion-euro debt is now owed to taxpayers in euro area nations and the IMF.

“It’s obvious that in order to change the situation in a meaningful way you ultimately need to have the official sector make some further concessions,” said Riccardo Barbieri, chief European economist at Mizuho International in London. “It’s highly likely there will be some degree of official debt forgiveness, but first Greece needs to show improvements.”

Merkel ruled out a writedown on debt held by Greek bailout funds and said there was no question of a further reduction for private investors after they participated in the biggest debt restructuring of its kind last year.

Merkel’s View

“I’ve said repeatedly that I don’t see a debt cut for Greece,” Merkel told reporters in Berlin on July 19. “All this talk about it sometimes worries me.”

The IMF’s executive board is set to discuss the results of the latest review of Greece’s progress today to approve a 1.8 billion-euro payment due in August. Greece will get 2.5 billion euros from the euro area this month, along with 1.5 billion euros from profits earned on bond purchases by euro-area central banks. A German parliamentary committee also is scheduled to consider giving the green light for payment today.

In October, Greece will be in line for another 500 million euros from its bailout package and the same amount from bond profits, assuming it passes the next set of milestones.

Creditors are parceling out funds after wage and pension cuts and tax increases spurred unrest and political instability, leading to delays. Greece is the only country in the euro region so far to require a second funding package.

Deeper Recession

The day he visited Athens, Schaeuble told ARD television in an interview that he couldn’t rule out Greece needing another program after 2014. The country’s economic outlook remains “uncertain,” the EU-IMF-ECB troika said on July 8.

The country is in a sixth year of recession, with growth of 0.6 percent forecast for next year by the troika. Unemployment in the first quarter reached a record 27 percent.

Deposits fell 700 million euros in June, the first decline since April, the central bank said on July 25, suggesting Greeks are using savings to make ends meet. Disposable income in the first quarter fell 6.2 percent as wages declined 11 percent, the Hellenic Statistical Authority said the same day.

Debt will be in the spotlight in the next troika review, which comes after the German election on Sept. 22, when a closer look will be taken at Greece’s state-asset sales plan, which has fallen short of expectations.

The revenue target for asset sales, used to pay down debt, has been repeatedly revised because of delays. Greece failed last month to sell national gas company Depa SA.

The Greek financing gap, put by the EU at 3.8 billion euros by the end of 2014, will be discussed before restarting the mission in September, an official in Brussels said on July 26.

Greece will need to identify another 8,300 state employees to join the “reallocation” program by the end of September and another 12,500 by the end of the year as part of commitments, as well as dismiss 4,000 people outright by the end of 2013.

“We’re now down to the hardest part of the program, namely reallocating or letting go government employees,” Barbieri said. “Official lenders want to see some evidence the government is serious about cutting employment.”

[Bloomberg]

ekathimerini.com , Monday Jul 29, 2013 (09:52)  
Ex-BoC executives face trial over meltdown
Greece may have to set money aside to cover bond losses
Greece´s 3-year yield drops to 9.61 pct
Hollande suggests he and Merkel will move jointly to help Greece
Courts provide names of judges to try ex-minister
The Supreme Court and Council of State provided Parliament Speaker Vangelis Meimarakis on Friday with a list from which the names of the judges that will preside over the special court for e...
Poll shows SYRIZA´s lead over New Democracy narrowing
A Public Issue poll published on Friday showed SYRIZA’s lead over New Democracy narrowing by 4.5 percentage points since last month. Nevertheless, the opposition party still held a lead of 7...
Inside News
SOCCER
Abidal cuts short playing career at Olympiakos
Former France and Barcelona defender Eric Abidal announced his retirement from football on Friday, a day before his last match. Abidal said he will finish after playing for Olympiakos agains...
SOCCER
PAOK loss at Giannina brings Olympiakos to within a point
The bad losses that PAOK and Panathinaikos suffered on the road on Thursday allowed Olympiakos to gain significant ground on the table and come to within one point from the top after the mid...
Inside Sports
COMMENTARY
New weapons of diplomacy
Hollywood screenwriters couldn’t make it up: That Sony, one of the world’s biggest film producers, would be forced to pull a comedy about the assassination of North Korea’s dictator after a ...
EDITORIAL
Oblivious to change
The world around us is undergoing many important changes while we sit around stewing in our own juices. US President Barack Obama is actually talking with Cuba’s Raul Castro, for example, bu...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Ex-BoC executives face trial over meltdown
2. Greece may have to set money aside to cover bond losses
3. Greece´s 3-year yield drops to 9.61 pct
4. Courts provide names of judges to try ex-minister
5. Poll shows SYRIZA´s lead over New Democracy narrowing
6. Seven convicted of embezzling over 900,000 euros in EU farm subsidies
more news
Today
This Week
1. Independent Greeks MP Haikalis claims attempted bribery for presidential vote
2. Ship with 200 migrants off Pylos towed to Italy after passengers refuse to stop in Greece
3. Greek PM Samaras confronts peril putting his Greek transformation to vote
4. Independent Greeks leader backs MP's bribery claims, threatens to release video [Update]
5. Gov't spokeswoman says bribery claims 'badly-played charade,' heralds legal action if evidence not produced
6. Former premier Mitsotakis to meet President Papoulias to discuss political upheaval
Today
This Week
1. Juncker warns Greeks against voting 'extreme forces' into power
2. Romanos and the dilemma
3. Samaras summons bond vigilantes with euro exit talk
4. A friendly yet firm message from Pierre Moscovici
5. Europe's drama in Greece needs final act to avoid tragedy
6. High stakes
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2014, H KAΘHMEPINH All Rights Reserved.