17 January 2013

Reuters: Greece not out of woods, must stick to reforms

With EU partners starting to praise Greek efforts to exit its worst crisis in decades and some economic indicators showing fledgling signs of recovery, demands are increasing on the government to give up crippling austerity and reforms.

Mr Stournaras said: "What scares me is the big pressure from society, media and parliamentary deputies from all parties to ease the programme. We must resist - it's too early to declare victory. The primary deficit is what we are judged on. The troika expects it at zero but we believe we will do slightly better." "This means that there is a good chance our partners may further reduce our debt."

More debt relief might follow if Greece hits its fiscal targets and posts a balanced budget in 2013. Stournaras ruled out this including another debt buyback and said there was no discussion of a haircut of the country's debts to its euro area partners. Debt reduction may instead come in other ways such as cutting interest rates, he said.

He acknowledged unemployment, the euro area's highest at 26.8 per cent in October, would take longer to start declining and only after the economy starts to grow, which is expected in late 2013. GDP is expected to decline 4.5 per cent this year, the country's sixth consecutive year of contraction.

Stournaras said the government did not want to manage state banks but would take them over if needed, not to run but supervise them. "If the crisis has taught us something, it's that supervision was lacking", said Stournaras. The minister dismissed concerns the shaky ruling coalition may buckle under pressure, saying Samaras and his junior leftist partners were fully committed. The government has seen its majority in parliament fall as deputies have been leaving in protest of harsh legislation.

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