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24 November 2013

Light at the end of the tunnel for Greece?


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Greece is on the right track, said Chancellor Merkel after meeting with Greek Prime Minister Samaras in Berlin. Samaras used the occasion to hold the Troika to its past promises of relief.


Merkel made the following statement at a joint press conference (translated from the German):

"We have looked at how Greece has developed and the Prime Minister has been able to present me with a number of very impressive facts. As I said yesterday: Greece has made progress. The most obvious is certainly the fact that a primary surplus was generated, but the reforms that are carried out in Greece go in fact much deeper and are more far-reaching.

Germany is also trying to be helpful bilaterally, in addition to the European support. This includes on the one hand, within the framework of the Task Force of the European Commission, the implementation of major reforms in the areas of local administration and health care. These projects are progressing well and are now really up and running. Furthermore, the Kreditanstalt für Wiederaufbau (Reconstruction Credit Institute) has supported the establishment of a development bank in Greece, the so-called "institution of Growth".

There are now two things on the agenda: Firstly that Greece is renegotiating at the moment with the Troika so that the next tranche of the second Greek aid programme can be released. Secondly, Greece will take over the Presidency of the European Union on 1 January 2014, and we will provide assistance in this as well. 

Greek Prime Minister Antonis Samaras commented: "In the adjustment of our budget we have achieved our goals - on some issues we have even gone beyond it. Greece, as the Chancellor said, has achieved a primary surplus. I want to remind you that this primary surplus was set in the programne as a target for 2014, not for this year.

In 2013 we have a budget and an economic balance sheet that are balanced for the first time after decades. This shows that we are improving the situation. We are balancing out the structural imbalances that existed in the Greek economy. There is no doubt that all of this goes hand in hand with great sacrifice and great cost for the Greek people. But there is also no doubt that more needs to be done and that we must continue our efforts.

Now we are entering a period of economic recovery after seven very tough years of recession. There is now light at the end of the tunnel. The economic recovery will encourage the Greeks to further continue their efforts, for the sacrifices are showing results. We are credible and the Greek bonds are already evaluated more highly."


Deutsche Welle further reported that the extent of the praise was surprising, given Germany's recent disagreement with European partners regarding Greece's next tranche from its second aid package. The Troika has been seeking Greek clarification of a €1.5 billion gap in the country's 2014 budget plans. EU countries had also criticised Greece for its lack of progress with regard to reforms. In light of Greece's disagreements with the Troika, many Greeks fear additional austerity measures might be on the way - and that after tens of thousands of public jobs and numerous social programmes have already been eliminated. Samaras, however, categorically rejected that notion after his meeting with Merkel.

"We are on track, we don’t ask for anything else", Mr Samaras is quoted as saying by the New York Times. "We are doing our part of the deal and believe that everyone else should be doing their part." His comments referred to a decision taken last November by the Eurogroup of eurozone finance ministers, when they agreed that Greece would be eligible for a fresh look at its needs as soon as it was able to finance current government spending, improve the economy and fulfil other promises to its international lenders.


At the same conference organised by Süddeutsche Zeitung, German Finance Minister Wolfgang Schäuble said that Greece's achievements in the last 1.5 years, which included better-than-expected growth and progress in reducing its deficit, merited respect. He also pointed to the decline in the difference between yields on German and Greek bonds.

As reported by Reuters, he said government crises and coalition negotiations no longer posed contagion risks for the single currency bloc as a whole, without specifying which country or countries he was referring to. "The euro is stable, financial markets are no longer concerned about the future of the eurozone and there are no risks of contagion anymore."

At the same time he warned that no wrong incentives should be given by the continuing low interest rate policy of the European Central Bank (ECB), Handelsblatt reports. The ECB did a better job of securing price stability than its predecessors, Schäuble said, however, it would have to be ensured that the monetary policy would not create incentives to delay reforms in euro area countries. 

See also: Greece needs new targeted measures, says IMF's Poul Thomsen





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