Eurozone tells Greece it needs 2bln more in savings next year

Greece’s lenders are demanding that it will have to produce an extra 2 billion euros in savings in 2014 following a Eurogroup meeting in Luxembourg on Monday.

Kathimerini understands that Finance Minister Yannis Stournaras was told he will have to take more measures next year despite the government’s hopes that it would avoid such a move.

Following the talks, Stournaras insisted that Athens would not opt for any more “horizontal” cuts, affecting pensions and wages. The Greek finance minister also challenged the assertion made by European Central Bank executive board member, Joerg Asmussen, that Greece faced a “significant fiscal gap” in 2014.

“There is no significant fiscal gap,” Stournaras told reporters. “We do have fiscal challenges – always.”

Asmussen also said a financing gap of 5 billion euros to 6 billion euros has opened in the second half of 2014 under Greece’s international rescue program and euro-area central banks wouldn’t roll over Greek debt to fill the hole.

“We must find a way to close this financing gap and there is absolutely no way that it can be done in a way of roll-over bond or whatsoever which results in monetary financing,” he said. “This is not possible for the ECB and not for the whole euro system.”

Stournaras said the financing gap in the second half of next year is around 5 billion euros and the euro-area finance ministers had an initial discussion about it at today’s gathering. He also said all options are being considered to plug the gap and a decision would come in late December.

“All the ideas came on the table,” Stournaras said. “Nothing is off the table.”

The finance minister said he was hopeful that the latest troika review could be concluded soon and that the two sides were close to resolving a number of outstanding issues, including the fate of several state-owned companies. This would pave the way for Greece to receive another 1 billion euros in loans, leaving just 10 billion more to be disbursed from the European Stability Mechanism in the months to come.

Stournaras also estimated the funding gap until the end of 2016 would be 10.5 billion to 10.8 billion euros. He said this could be covered “without a third bailout and without Greece returning to the markets.” The discussion about how to cover this is due to take place towards the end of the year with the aim of concluding by January 2014.

Greece’s proposal includes rolling over bonds held by Greek banks and used for collateral with the ECB and paper held by eurozone central banks, known as ANFAs. Using any money left over from the 50 billion euros borrowed for the recapitalization of Greek banks is also an option.

Stournaras also proposed ways in which Greece’s debt load could be lightened.

[Kathimerini & Bloomberg]