Greece hoping for six-month market turnaround: minister
By John Hadoulis and Isabel Malsang (AFP)
ATHENS — With a new midterm budget, ongoing reforms and eurozone support, debt-hit Greece within six months hopes to convince sceptical investors that its recovery is on track, the finance minister said on Thursday.
"Everything can change in six months," George Papaconstantinou told AFP in an interview, insisting that restructuring the country's huge debt was "not an option" and arguing that Portugal's fall should end eurozone contagion fears.
"We have said many times that restructuring is not an option. It has huge costs and the benefits do not outweigh the costs," Papaconstantinou said before flying to Budapest for a meeting of European finance ministers.
"It is not an option, period," he said.
After a year of painful austerity cuts producing mixed results, the Socialist government is facing increasing calls to even out the repayment of a public debt that has exploded to around 340 billion euros ($486 billion).
Greek payments are currently assured under a 110-billion-euro loan from the European Union and the International Monetary Fund that runs to 2013, but one of the rescue conditions is to raise fresh money on the markets from 2012.
For the time being, however, persistent doubts on the recession-hit Greek economy's prospects -- along with a succession of downgrades from credit rating agencies -- have kept the country's borrowing rates prohibitively high.
"I do realise that the markets expect some kind of restructuring but we believe that the policies we are implementing will allow us to continue servicing the debt," Papaconstantinou said.
Debt restructuring has been consistently ruled out in Greece for fear of destroying the country's fragile credibility with markets and placing major strain on the nation's banks.
Greece will in 2012 have a payments schedule of 66 billion euros, of which only 25 billion will come from the EU-IMF bailout loan, he noted.
"The rest must be a combination of privatisations, short-term issues and long-term issues," the minister said.
The exact time of Greece's money sortie will depend on market conditions.
"Six months is a very long time for the markets," Papaconstantinou argued.
"Look at what happened six months ago. Last October you had spreads dropping by about 300 points in a month and a half and you were going towards a normalisation. Then Ireland happened."
Ireland last year became the second eurozone country to request a bailout. Portugal followed suit on Wednesday after weeks of denial, much like Greece a year ago.
Analysts have said Portugal could require a package worth 70 billion euros (100 billion dollars), compared with 85 billion euros for Ireland and 110 billion euros for Greece.
Papaconstantinou reasoned Thursday that Portugal could be the last of the eurozone's disaster stories.
"Now it is quite possible that the fear of the market and the uncertainty will come to an end once also Portugal has access to the EU facility and fears of contagion will stop," he said.
"We will maybe enter a normalisation phase," the minister said.
Athens is currently locked in talks with its EU and IMF creditors on additional measures to restore confidence in the economy.
A three-year budget presented to the EU-IMF auditors this week forecasts cutting the soaring Greek deficit by some nine percentage points, to one percent of output by 2015.
But a decision by the European Central Bank on Thursday to increase its main interest rate for the first time since 2008 could complicate Greek recovery.
The economy partly relies on bank muscle to return to growth, and Greek banks have been relying almost exclusively on the ECB for loans since the nation's debt crisis began.
"It is clear that higher interest rate costs are not particularly easy for us, there is no question about it," Papaconstantinou said Thursday.
"But we are within a programme where the decisions of the European Council have allowed the debt to be much more sustainable," he said.
Greece's eurozone partners last month agreed to cut the cost for its EU-IMF bailout package by a full percentage point and extend its repayment to seven and a half years from three years.
