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02/11
Greece ‘Successfully’ Rescued From Abyss, EU, IMF Say
By Natalie Weeks and Eleni Chrepa – Greece’s economy has been rescued from the “abyss” as austerity measures aimed at restoring order to public finances “are being implemented as planned,” the European Union and International Monetary Fund said.
“While there have been some delays and shortfalls, it should not undermine the fact that the program is broadly on track,” Poul Thomsen, head of the IMF’s Greece mission, told a news conference in Athens today. “We are ready for the second phase of the program, having successfully pulled the economy from an abyss.”
Greece’s fiscal health still requires a “broad base of structural reforms” to underpin a sustainable recovery, he said. The second phase will focus on a tax overhaul and state- asset sales that may raise as much as 50 billion euros ($68 billion) by 2015 to pay down debt, while further salary cuts and levy increases have been ruled out for the medium term, Servaas Deroose, a European Commission economist, told the briefing.
Thomsen and Deroose were in Athens for a quarterly review of Greece’s progress under a 110 billion-euro EU-IMF bailout it received last May to avert default. Approval of Greece’s efforts will ensure payment of the plan’s next installment of 15 billion euros in March. Deroose said he’s “confident” the funds will be disbursed.
Shares Advance
Shares in state-controlled banks shot up after the remarks by Deroose, who said an estimated 15 billion euros may be raised in 2011 and 2012 by selling commercial real estate and stakes in companies, both listed and unlisted. Hellenic Postbank SA gained 10.5 percent, Attica Bank SA rose 9.7 percent and Agricultural Bank of Greece SA added 13.2 percent at 4:45 p.m. in Athens. The government will complete the sale of the 110-year-old Postbank in 2011, according to a commission report released in December.
Greece has vowed to trim the budget gap to 7.4 percent of gross domestic product in 2011 from 9.4 percent in 2010. The EU and the IMF said today the 2010 deficit was about 9.5 percent. Fallout from Greece’s crisis led to a surge in bond yields of distressed euro-area nations as investors shunned their debt.
The yield on Greece’s 10-year bond remained at a euro-area high of 11.15 percent today. The extra yield that investors demand to hold the 10-year security instead of German bunds was at 824 basis points compared with 811 basis points yesterday and a record 973.6 basis points on Jan. 7.
Austerity Moves
Prime Minister George Papandreou’s wage and pension cuts and sales-tax increases in return for the emergency loans from the EU and the IMF have contributed to a slump in demand, with Greece’s economy shrinking an estimated 4.2 percent last year. EU and IMF officials today stuck to forecasts for a 3 percent contraction this year.
Finance Minister George Papaconstantinou said earlier this month he was confident a comprehensive package from the EU would stem borrowing costs and allow Greece to return to international markets for financing this year. The country is banking on lower lending rates on the EU-IMF loans, as well as an extension of the maturities, to help assuage market fears of a Greek default.
Greece may return to markets no later than early next year, Thomsen said today, adding that external conditions aren’t “as favorable as expected.”