Greece estimates that a two-year extension on its bailout would create a financing gap of less than 18 billion euros, which it could cover by issuing short-term debt rather than pleading for more money from lenders, government officials have told Reuters.
The argument is part of Greece’s efforts to persuade irate European partners and the International Monetary Fund (IMF) that being granted more time to hit budget targets does not automatically mean forking out more money to save the country from bankruptcy.
“The government does not want the funding gap that will be created if we are given a two-year extension for implementing the measures to be a burden on our lenders,» a government official who declined to be named said.
“This is our strategy on this issue. This is why (Prime Minister Antonis) Samaras said in his recent meetings that we need time, not more money.”
Greece believes the funding gap could be bridged by issuing T-bills, the official said, which Athens relied on to get past a funding crunch in August as it awaited its next tranche of aid.
“The government has a number of proposals on how it could cover the funding gap,» the official said.
“One of them is to be allowed to issue more T-bills in 2013, when the economic environment will have improved and we will be able to do it at a lower cost.”
Samaras travelled last week to Paris and Berlin as part of a charm offensive to persuade his counterparts that Greece would not renege on its commitments outlined in the bailout and deserves more time to implement painful austerity cuts.
The proposal for a two-year extension has so far met a frosty reception in Europe – where anger at Athens’ history of failed promises is riding high – but Samaras has argued that recession Greece desperately needs «air to breathe».
Greek officials maintain that the country could get its 130-billion-euro bailout program back on track quicker if it is given a two-year extension on targets, which they say will let the economy rebound a year earlier than it would otherwise.
“An extension will give us room to achieve higher rates of growth and employment,» Finance Minister Yannis Stournaras told parliament during question time late on Monday.
“We are seeking an extension in a way that will not take us off track with our goals.”
Athens has calculated that its economy would shrink by 1.5 percent in 2013 and grow by 2 percent in 2014 if it was granted two more years to push through the cuts, Greek officials say.
Without an extension, the economy would contract by up to 4.5 percent next year and see no recovery until 2015, officials said, citing the calculations.
“We expect the economy would return to growth in 2014 rather than 2015 and that will work in favour of the fiscal position in the long term,» a second government official told Reuters on condition of anonymity.
Some EU officials, however, feel that Greece is so far off-track from the terms of its bailout that it would need about 20-40 billion euros in additional financing to put it back on course – a cost that would have to be borne by the European Central Bank or euro zone governments.
Under the terms of the bailout, Greece needs to push through nearly 12 billion euros of cuts for the next two years to bring its budget deficit to below 3 percent of GDP by the end of 2014 from 9.3 pct in 2011.
Mired in its fifth year of recession, Greece’s economy is set to shrink by over 7 percent this year according to Samaras, who has likened the crisis to America’s Great Depression.
Nearly one in four Greeks is jobless, while citizens have taken to the streets to protest repeated rounds of wage and pension cuts that have depressed living standards and pushed up suicides.