07 February 2013

Bloomberg: Stournaras says Greek recovery may begin by end-2013

A turnaround could appear on a monthly or quarterly basis toward the end of this year, Stournaras said. He agreed with an International Monetary Fund forecast of a return to annual growth of 0.6 per cent in 2014. The IMF expects Greece’s economy to contract 4.2 per cent this year.

In November, Stournaras secured two extra years until 2016 from euro area peers to meet European Union and IMF budget reduction targets. That came after Prime Minister Antonis Samaras’s three-party coalition government fought for and secured parliamentary approval for a €13.5 billion two-year package of budget cuts demanded by international lenders in return for funds that would keep the country solvent and in the euro area.

Stournaras said that 2013 will be “a very difficult year”, underscoring investor concerns that social unrest could resume. He  used an emergency decree to order striking seamen back to work, the second time in as many weeks the government opted for the rare move to break up industrial action.

Greece has to deliver on state asset sales to cut a debt mountain that will peak at 179 per cent of gross domestic product this year and threatens the continued payment of funds from the IMF. European leaders have cut rescue loan interest rates for Greece, suspended interest payments for a decade, and given the troubled nation more time to repay while it carried out a bond buyback last year. Stournaras said there was little scope to tweak the terms of a €50 billion recapitalisation plan for the country’s lenders in the face of calls from the banks for more attractive terms for private investors. He said that setting up a so-called bad bank to take on non-performing loans in the system wasn’t a priority.

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