Greece must resist internal political pressure to slow economic reforms in a year that will dictate whether it avoids bankruptcy, Finance Minister Yannis Stournaras told Reuters in an interview.
With EU partners starting to praise Greek efforts to exit its worst crisis in decades and some economic indicators showing fledgling signs of recovery, demands are increasing on the government to give up crippling austerity and reforms.
“What scares me is the big pressure from society, media and parliamentary deputies from all parties to ease the program. We must resist … it’s too early to declare victory,” he said from his office on Syntagma square overlooking parliament.
Stournaras, an economist recruited by Prime Minister Antonis Samaras’s conservative-led coalition after it won elections in June, said there were signs Greece was starting to exit the three-year debt crisis that shook the euro zone.
Money is returning to Greek banks, bond prices are rising and the 2013 primary budget will do better than the troika of international lenders predicted for the year, registering a 0.4 percent surplus, despite a crippling recession.
“The primary deficit is what we are judged on. The troika expects it at zero but we believe we will do slightly better,” he said. “This means that there is a good chance our partners may further reduce our debt.”
The International Monetary Fund agreed on Wednesday to pay the next aid tranche under the country’s 240-billion-euro international bailout and said Athens was moving in the right direction. But IMF chief Christine Lagarde urged it to do more to boost productivity and lower prices.
Greece’s euro area partners agreed last year to extend the maturities and reduce the interest on the nation’s bailout funds to help cut its debt mountain to a more sustainable level of 124 percent of GDP in 2020, from an estimated 173 percent this year.
More debt relief might follow if Greece hits its fiscal targets and posts a balanced budget in 2013, they said.
Stournaras ruled out this including another debt buyback and said there was no discussion of a haircut of the country’s debts to its euro area partners. Debt reduction may instead come in other ways such as cutting interest rates, he said.
He acknowledged unemployment, the euro area’s highest at 26.8 percent in October, would take longer to start declining and only after the economy starts to grow, which is expected in late 2013. GDP is expected to decline 4.5 percent this year, the country’s sixth consecutive year of contraction.
“Unemployment is our big thorn,” he said. “There is a time lag between GDP growth and unemployment decreasing and it’s a serious problem, both economic and social.”
A public fed up with waves of tax hikes and salary cuts has taken to the streets, in often violent protests, and lashed out at politicians they hold responsible for the crisis.
Stournaras, who served as chief economist for the socialist government that brought Greece into the single currency in 2001, said people must show patience and solidarity for one more year.
“We are facing a huge crisis, we have not yet left the hot zone of bankruptcy,” he said. “We are doing better but we can’t say that we have escaped all danger. The year 2013 will determine whether we will.”
Greece expects to meet this year’s privatization revenue target of 2.6 billion, with investor interest coming mainly from China and Russia for state companies going on the block, including natural gas distributor DEPA and gambling firm OPAP, Stournaras said.
The banking sector has almost completed its consolidation through a wave of mergers and may not need all of the 50 billion set aside from Greece’s massive international bailout for bank recapitalization.
“Synergies from mergers have not been taken into account – National with Eurobank, Alpha with Emporiki, Piraeus with Agricultural and General. In the end, they may need less than 50 billion,” Stournaras said.
It will be more difficult to keep the lenders in private hands as investors seem reluctant to put up cash for the 10 percent requirement to avoid nationalization.
Stournaras said the government did not want to manage state banks but would take them over if needed, not to run but supervise them.
“If the crisis has taught us something, it’s that supervision was lacking,» said Stournaras, who has also served as head of Emporiki bank.
The minister dismissed concerns the shaky ruling coalition may buckle under pressure, saying Samaras and his junior leftist partners were fully committed. The government has seen its majority in parliament fall as deputies have been leaving in protest of harsh legislation.
But he said he was more fortunate than others in the government because, as a technocrat, he did not have to face a political cost.
“I’m not a politician and that’s an advantage in a crisis, Stournaras said. “Right now, I am under pressure from media, social groups, professional groups, special interest groups and even MPs on whatever you can imagine — not to shut down tax offices, to lower the tax on heating oil, to raise salaries, to relax the program.
“I will not be the one to destroy what we have achieved with sweat and tears in the last six months,” he said. “Credibility is very hard to build and easy to lose.” [Reuters]