Prime Minister Antonis Samaras is due to leave Athens on Wednesday for what is being billed as a crucial trip to China, where his government hopes to strengthen relations with Beijing, boost the number of Chinese visiting Greece and draw new investors.
Samaras leaves with the wind in his sails after the Eurogroup on Monday approved the release of 4.2 billion euros in bailout loans over the next few days and another 3.3 billion next month as long as reform targets are met. On Tuesday, Fitch also upgraded Greece from a CCC rating to a B-. The improvement in the country’s sovereign credit rating came almost to a year to the day that Fitch downgraded Greece to CCC.
“The Greek economy is rebalancing: Clear progress has been made toward eliminating twin fiscal and current account deficits and ‘internal devaluation’ has at last begun to take hold,” the ratings agency said. “The current administration has displayed much greater ownership of the EU-IMF funded EAP than its predecessors, committing to further upfront fiscal consolidation and a renewed push on structural reforms.”
However, Fitch added a number of caveats to its improved rating, stressing that the implementation of reforms remains a problem and that public debt sustainability and economic recovery cannot be taken as givens.
“Failure of the economy to recover, leading to the re-emergence of renewed funding gaps, could trigger a negative rating action,” it added. “Likewise, renewed political and social instability, leading to an unraveling of the EU-IMF program, would intensify the risks of Greek exit from the eurozone and widespread default.”
The Finance Ministry moved quickly on Tuesday to douse speculation about a serious fiscal gap in 2015 and 2016. A European Commission report released on Tuesday suggested that the shortfall over the two-year period could be as high as 8 billion euros but ministry sources said it would be as low as 2.4 billion euros and this would be covered by an increase in tax revenues.
The reforms referred to in Fitch’s statement also remained a concern for the government on Tuesday as it is having difficulty identifying the 2,000 civil servants it has agreed with the troika to fire by the end of June. The government has discovered that its plans to close down dozens of public organizations and fire public sector workers who had breached the code of conduct would not give it the number of dismissals it needs over the next few weeks.
Administrative Reform Minister Antonis Manitakis is to write to all his cabinet colleagues to ask for them to propose job losses from public bodies that come under their control so the government can meet its target.
As for the trip to China, Samaras will hold talks with his Chinese counterpart Li Keqiang and visit the cities of Beijing, Shanghai and Hangzhou. He will be accompanied by some 50 Greek businessmen from various sectors of the economy and representatives of Greece’s privatization fund. The Greek government is hoping that tourism will be one of the sectors to benefit from the visit but Greece is also hoping to attract Chinese interest in its airports and sea ports.
Samaras will be in China until Sunday, when he will fly to Azerbaijan, where he will discuss the Trans Adriatic Pipeline (TAP) with the country’s leadership. Azerbaijan’s state oil company SOCAR is also one of the leading contenders for the purchase of Greece’s natural gas network operator, DESFA.