19 January 2012

FT: Greek PM urges backing for reforms

The Greek prime minister has urged political leaders to back a critical debt restructuring and further painful economic reforms, amid rising concern among official lenders that Athens is failing to deliver on its promises.

Lucas Papademos warned the ruling coalition that without stronger political commitment, Greece could lose access to a new €130 billion bail-out package and fall into a disorderly default.

Without funds from the new package, Greece would be unable to meet a €14.5 billion debt repayment due on March 20.

Mr Papademos and Evangelos Venizelos, finance minister, held a meeting with representatives of creditors holding close to €200 billion of Greek debt after a day of what bankers called “fine-tuning” on a deal. European officials are hoping the Greek debt restructuring deal will be completed by Monday, in time for it to be signed off at a meeting of eurozone finance ministers in Brussels.

But there are growing signs the Greek government could be in for another tough negotiation with international lenders once the deal is completed. Greece has missed an upwardly revised budget deficit target of 9.5 per cent of gross domestic product for 2010 because of overspending and poor revenue collection as the country sank deeper into recession.

Mr Venizelos has said the economy contracted by more than 6 per cent last year on top of 4.8 per cent in 2010. Another year of recession is forecast before Greece can look forward to a modest recovery.

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