By Jonathan Stearns
Greek Prime Minister Antonis Samaras said his country will avoid Argentina’s fate of staying mired in economic troubles more than a decade after defaulting on debt.
Greece is seeking to emerge from a six-year recession after triggering the euro-area debt crisis, receiving 240 billion euros ($328 billion) in international aid and undergoing the biggest-ever writedown of privately held debt.
The Greek government has slashed a budget deficit that was more than five times the European Union’s limit of 3 percent of gross domestic product in 2009. In addition, the government returned to bond markets in April after a four-year exile and predicts economic growth in 2014 for the first time since 2007.
“Things are now improving,” Samaras told the European Parliament Wednesday in Strasbourg, France. “In a few years, I believe this is going to be a bad memory. If you want the opposite example of Argentina, a very rich country that went bankrupt back in 2002, 12 years later, Wednesday, they are still in a crisis, on the verge of a collapse again, much more suffering and no hope -- this is what we did not want to happen in Greece.”
Argentina, whose economy is contracting and foreign currency reserves are near an eight-year low, is seeking to regain access to credit markets for the first time since a 2001 default on $95 billion of debt.
Samaras is promising less austerity and more prosperity to Greeks squeezed by higher taxes, near-27 percent unemployment and a 33 percent slump in worker incomes since 2009. Clinging to a four-seat majority in a domestic parliament where the main opposition party opposes the budget-tightening conditions for aid, he’s trying to avoid having to call elections before his four-year term ends in 2016.
The Greek government, a coalition of Samaras’s New Democracy party and the Socialist Pasok, has been bolstered by the achievement in 2013 of a budget surplus before interest and one-time payments. That will trigger euro-area talks later this year on possible further financial relief for Greece, whose load of debt -- now mainly in the hands of public creditors -- still stands at 175 percent of GDP.
The government has also been emboldened by the sale in April of 3 billion euros of bonds. Since then, Samaras has repeatedly said the country has regained the confidence of bond investors.
“They are saying that Greece is moving to the right direction,” he said Wednesday in separate comments to reporters in Strasbourg. “Our spreads have been continuously falling.”
Investors demand 468 basis points of extra yield to hold Greek 10-year bonds instead of equivalent German debt, down from 649 basis points at the end of 2013.
Clouding this brighter picture are data pointing to lingering Greek economic weaknesses. A purchasing managers index released this week by Markit Economics showed a reading below 50, signaling economic contraction. It was the lowest reading since November.
In addition, Greece’s Statistical Authority said last week that exports in April fell almost 21 percent from a year earlier, while exports in the first four months of 2014 dropped almost 8 percent. Greece’s current-account deficit widened in April.
Samaras Wednesday brushed off a question about these developments, saying Greek unemployment has peaked, tourist arrivals to Greece this summer will increase to a record of about 20 million and the economy as a whole will grow 0.4 percent to 0.5 percent in 2014. He also said Greece may need no extra loans once its current rescue ends.
“There is no prediction for Greece that we will need any additional loans,” he said.
On top of the persistent signs of economic sluggishness in Greece are political concerns in the euro area about the government’s commitment to forge ahead with the economic overhaul outlined in the country’s rescue program.
Last month, euro-area finance ministers refused to release a 1 billion-euro aid disbursement for Greece because they said it needed to step up market deregulation, revenue collection and anti-corruption actions. [Bloomberg]