French Finance Minister Francois Baroin and his German counterpart Wolfgang Schauble have insisted that despite doubts, the eurozone?s plan for assisting Greece to overcome its debt problems will work.
?Greece can succeed in making its debt sustainable in the long term if it succeeds in both increasing growth and reducing its debt ratio,? the pair wrote in an op-ed in the Financial Times. ?Greece has committed itself to additional drastic consolidation measures, with the goal of bringing its budget deficit below 3 per cent of gross domestic product by 2014.
?It has also committed itself to profound structural reforms to strengthen growth and competitiveness, as well as extensive privatisation. European Union structural funds for Greece will also be more closely targeted at increasing growth and competitiveness. On this basis, Greece will be able to overcome its debt problems and return to growth.?
Baroin and Schauble said that the private sector will also play an important part in helping Greece.
?The EFSF will extend its loan periods to between 15 and 30 years, and lower its interest rates. Additional funding of about ?109bn will also be made available,? they wrote. ?The private sector, meanwhile, will voluntarily extend bonds repayment periods, substantially reducing Greece?s refinancing needs and, over time, taking losses of 21 per cent ? the substantial contribution for which we have strived.
?The bonds will be extended by 30 years, and their nominal value will be guaranteed by the EFSF. This will give Greece time to implement reforms and to resume more solid economic growth.?
The finance ministers said the strengthening of the EFSF would also improve Greece?s position.
?The EFSF and ESM must be enhanced to allow both funds to engage in precautionary programmes, to recapitalise financial institutions and act on secondary markets if necessary to counter contagion risks in a timely fashion,? they wrote.
?Purchases may only be possible when the European Central Bank determines that exceptional circumstances prevail in financial markets and that there are risks to financial stability. And we will look further into the role of the rating agencies, starting from questions of transparency and oversight and ending with the limited number of global players in the field.?
Baroin and Schauble, however, said that it will take some time to get the eurozone back on track.
?Rebuilding confidence in the eurozone will require patience, considerable stamina and vision. We have embarked on a way to ever closer co-ordination and co-operation of our national fiscal policies.
?Only by evolving the European monetary union?s institutional structures in such a way that euro members are obliged to adopt a fiscal and economic policy that reflects their joint responsibility for the common currency will we master the challenges that lie ahead.?