Fiscal recovery figures not enough
Greece tried to convince European Commission officials in Athens yesterday that it has the right formula for putting its finances in order and averting the risk of bankruptcy but the visitors from Brussels were looking for more than just the right fiscal figures. Government sources said that the EU officials, accompanied by representatives from the European Central Bank, focused on how Greece plans to improve on its poor competitiveness, which has made the country one of the worst places in the world to do business, according to international surveys. The visitors, scheduled to end their three-day trip today, grilled Greek officials as to how and when the government will deregulate labor markets and slash red tape, calling for the details to be clearly outlined in the Growth and Stability Program to be submitted to Brussels at the end of the month. «The problem of the large deficit is not being addressed by the EU as a single factor,» a Greek government source told Kathimerini English Edition. «It is being assessed along with the high current account deficit and our competitiveness.» The Socialists, who will have been in office for 100 days on Tuesday, have said they will push through economic reforms such as introducing changes to the ailing pension system. Unions, however, have announced opposition to any changes they see as a threat to their benefits and are preparing strike action. The government also presented EU officials with a road map as to how it intends to reduce the deficit to 3 percent of gross domestic product in 2012 from 12.7 percent last year. Goals include tax hikes and spending cuts that will slash the deficit by 10 billion euros in 2010. A tax overhaul in March is seen as helping to boost revenues while spending will be cut with the help of a reduction in public servants’ remuneration. Officials yesterday denied reports that an increase in value-added tax is on the cards. Investors, however, still seem skittish about Greece being able to improve on its poor fiscal record in 2010, a year when the economy is expected to keep shrinking. The extra yield, or spread, investors demand for holding 10-year Greek bonds instead of benchmark German Bunds was little changed at 227 basis points (bps) yesterday. It has fallen from 277 bps in mid-December but is way above levels seen in most eurozone nations, where it is below 100 bps. [email protected] Gov’t takes ‘aggressive’ steps The Greek government has responded «very aggressively» to the deterioration of its public finances and the International Monetary Fund will look with interest at the specifics of the plan, IMF First Deputy Managing Director John Lipsky said. After «quite loose» fiscal policies in the past few years, the new government has established targets to reverse its budget deficit, Lipsky said in an interview with Bloomberg Radio. Meanwhile, Robeco Groep NV, which oversees $186 billion in assets, increased its holding in Greek bonds because they have declined enough to reflect concern the country may struggle to pay its debts. The company moved to a «neutral» position on the bonds from «underweight,» said Kommer van Trigt, head of interest rates at the Rotterdam-based money manager. Robeco has an «underweight» holding of Spanish bonds because they haven’t fallen as much as Greek debt, while the two countries have «comparable» problems, he said. «Greek bonds have already been punished, judging from prices and spreads,» van Trigt said.