Finance Minister George Papaconstantinou on Thursday expressed certainty that the Greek economy will begin exiting a dire economic recession this year.
In presenting an updated Memorandum, the minister said: “we are in the middle of a recession, at its worst part, but we will succeed because we are following the right course of stability and consistency.” Papaconstantinou said 2010 results dismissed those who doubted the government’s efforts and urged opposition political parties to participate in a dialogue over drafting a medium-term strategy fiscal framework.
He described the programme’s targets by saying that at the end of this period the fiscal deficit will have fallen to 3.0 pct of the country’s GDP, dropping further to 1.0 pct of GDP by 2015.
Government interventions to reach these targets in the period 2012-2014 amount to 8.0 pct of GDP. Papaconstantinou said the government cut the deficit by six percentage points to 9.4 pct of GDP in 2010 and aims at slashing the deficit to 7.4 pct of GDP this year.
Commenting on efforts to extend the repayment period for the EC-ECB-IMF bailout of 110 billion euros, Papaconstantinou reminded that the Eurogroup has agreed, in principle, on the issue last December, but predicted that an official decision would be included in a wider plan to be agreed upon by EU leaders in March. He noted that extending the repayment period was a significant step to deal with rising public debt, although he sounded cautious over whether such an extension was sufficient to stop a rising debt burden, saying it would also depend on how markets would respond to the EU’s plan.
Papaconstantinou stressed that the Greek government has also supported a plan to buy back state bonds and lowering interest for loans offered by the support mechanism.
The minister added that an updated memorandum would not include the target of raising 50 billion euros from privatisations and exploiting the state’s property, but reaffirmed that an existing target of raising 15 billion euros through privatisations. The government will hire an adviser by the end of March to record all commercial property of the state and to complete a first portfolio by June (a second commercial portfolio is expected by December).
Papaconstantinou said he supported mergers between banks and urged banks to proceed with “generous decisions” which will fortify them and make them independent from European Central Bank’s funding. He acknowledged, however, that the strength of the banking system depended on progress made in a fiscal consolidation program and how rapidly fiscal deficits were cut by the state. He reiterated that the state would participate in an ATEbank share capital increase plan.