No need to restructure Greek debt, take new measures: finance minister

Afp May 30, 2010

ATHENS: Greece does not need to restructure its debt or take extra measures beyond the austerity cuts agreed with the EU and the International Monetary Fund (IMF), the country's finance minister said on Sunday.

"Greece will not need additional measures," George Papaconstantinou told the Eleftherotypia daily in an interview, adding that debt restructuring "would be disastrous for the country's credibility."

The minister said the recession gripping the country would bottom out in 2010 and that recovery would "gradually" begin thereafter. "I remain confident and I believe that we will recover very quickly," he said. Greece has accumulated debt of nearly 300 billion euros (368 billion dollars) and was narrowly saved from default earlier this month by the first instalment of an 110-billion-euro bailout loan from the EU and the IMF.

 The government had to adopt unpopular austerity measures to clinch the loan, including tax hikes, wage and pension cuts and a hiring freeze in the civil service. It has also pledged to trim massive waste in state hospitals which have a combined debt of around 5.6 billion euros.

Greece will have to show progress in implementing these goals to secure the release of two more instalments worth 18 billion euros from the EU and the IMF by the end of the year. "The terms of the agreement are clear if the country is found not to have fulfilled its quarterly obligations, the funding could be summarily stopped," Papaconstantinou told financial weekly Kefalaio last week.

The finance ministry says its efforts to trim the budget deficit are ahead of target, but the health ministry has had no luck in reducing hospital debt and the labour ministry is desperately negotiating with the EU and the IMF the final terms of an unpopular pension reform that has angered labour groups.

The finance minister on Sunday insisted the ruling Socialists would not back down in the face of strong opposition to the austerity measures from unions who have so far held four general strikes and waves of street protests.

"The government has proven that it does not calculate the political cost when it comes to doing what is necessary for the good of the country," he said. Papaconstantinou also said he has had "close and constructive" cooperation with Bank of Greece Governor George Provopoulos, who was recently criticised by government lawmakers for allegedly failing to protect the country's battered bonds from speculators.

"The governor has given detailed explanations and I will respond to parliament (on the issue)," the minister said. A group of government lawmakers this month said speculators were given free rein by a central bank decision in October to extend the period permitted to investors to 'recycle' failed bond transactions.

"The extension of this period objectively creates great margin for speculation and manipulation," said the lawmakers, who included the head of parliament's financial affairs committee Vasso Papandreou. "With this decision, the settlement of bond transactions could be completed in ten days instead of three," one of the questioning lawmakers, Nasos Alevras, told Eleftheros Typos on Sunday.

"If the market has no naked sales there is no problem. But if there is speculation, this move could permit the speculation to intensify," he said. The Bank of Greece has rejected the charge.

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