Greece plays up progress as it takes on delicate EU presidency

ATHENS Wed Jan 8, 2014 12:01pm EST

1 of 2. Greece's Finance Minister Yannis Stournaras (R) and Deputy Finance Minister Christos Staikouras listen to questions during a news briefing related to the Greek presidency of the European Union in Athens January 7, 2014.

Credit: Reuters/Yorgos Karahalis

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ATHENS (Reuters) - Greece took over the presidency of the European Union on Wednesday and chose the moment to deliver a staunch defense of its efforts to recover from six years of recession and two bailouts that have cost it more than 200 billion euros.

Meeting Brussels-based journalists as Athens took on what is largely a ceremonial EU role for the next six months, Foreign Minister Evangelos Venizelos and Finance Minister Yannis Stournaras were quick to highlight nascent signs of recovery, with forecasts for the economy to grow marginally this year.

Prime Minister Antonis Samaras delivered a similar message, while all of them trod carefully around the possibility that Greece will need another loan or else have to write off or renegotiate a portion of its vast debts later this year.

Since it emerged in late 2009 that Greece had fiddled its statistics, the country has received two rescues totaling 240 billion euros - more than its annual output - from the EU and International Monetary Fund, and flirted with leaving the euro.

To try to put the economy back on a stable footing, the government has slashed spending, cut public sector salaries and pensions, raised taxes and begun to sell off state assets, enforcing a dramatic and deeply unpopular internal devaluation.

"No other country during peacetime has achieved as much as Greece has achieved since 2009," Stournaras said when asked what specific steps he had taken to make the economy competitive again after six years of contraction.

"People should this year begin to feel the impact in their pockets and in their everyday lives."

Asked if it was not essential for Greece to write off some portion of the money loaned to it by the EU and IMF to have any chance at a sustained recovery, both Venizelos and Stournaras demurred, while Samaras played up the signs of improvement.

"Greece, after huge sacrifices, is able to say that it is leaving behind the crisis," he told a joint news conference with European Commission President Jose Manuel Barroso.

Ahead of the arrival of Barroso and the rest of the members of the European Commission, police and paramilitary units sealed off the centre of Athens and demonstrations were banned to prevent any disruptions to the launch of the presidency.

DEBT WRITEDOWN

Because of Greece's enormous debt and low prospect of being able to pay them back in the next 30 years, the expectation is that some form of renegotiation will be required later this year, although it is a subject Greece is reluctant to broach.

Venizelos, a combative former finance minister and Socialist party leader, said no request for a "haircut" or write down in the value of its loans had been made and said he was only interested in how to make the outstanding debt more manageable.

"We want a serious technical discussion about how to make the debt sustainable in the long term," he said, adding that to this point none of the loans had cost European taxpayers a cent because all obligations had been paid in full.

Stournaras said there was room to lower the interest rates on the loans still further - even though they are barely above the cost of financing - as well as making changes to the pay-back schedule and using EU development funds in more imaginative ways to keep Greece solvent and on a recovery path.

"A reduction in the interest rate and a pushing back of the amortization schedule is more effective from the point of view of the financial markets," he said, dismissing suggestions that what Greece ultimately needed was debt relief.

Any new loan would likely come with further strict conditions on spending cuts and tax increases that Greece is determined to avoid, not least to avert further social unrest.

"There can be no more fiscal conditionality," the finance minister said, highlighting the dire impact earlier rounds of spending cuts, state salary reductions and tax increases.

"It's quite illogical to impose any more conditionality. It's totally self-defeating at this stage."

Over the past four years, Greece has forced through a 22 percent reduction in the minimum wage, cut average public sector salaries by nearly a quarter and slashed some pensions by more than 40 percent, delivering a deep "internal devaluation".

While the economy has contracted by almost 25 percent from its peak, the current account deficit has been erased, exports have picked up and growth of 0.6 percent is scheduled this year. Unemployment has stabilized, albeit at a painful 27 percent.

In a sign of increased confidence, Stournaras said it was likely Athens would offer a five-year bond in the second half of 2014, with the funds raised via an investor roadshow.

While that would mark a significant step forwards, it would still fall a long way short of full market access - and socially and politically Greece remains deeply troubled.

Samaras's coalition government is barely holding on to a three-seat majority in parliament. He dropped plans to increase healthcare costs this week and will raise taxes on cigarettes instead, largely to avoid the threat of a parliamentary revolt.

The major event during Greece's presidency will be the European Parliament elections in May, when a surge in support for extreme-left, -right and anti-EU parties is expected.

In Greece, the left-wing Syriza group is forecast to top the polls, potentially disrupting Samaras's delicate coalition.

(Writing by Luke Baker; Editing by Ruth Pitchford)

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Comments (2)
Tiu wrote:
Split the Euro zone back into its constituent countries. It does not work as a single entity. There is too much difference between south west, south east, north east and north west.
Keeping the Euro as a trading currency for European businesses would be good, but not entirely necessary. The Euro is not that old and has not worked very well – it’s probably just a Trojan Horse for the One World Order fascists.

Jan 08, 2014 8:16pm EST  --  Report as abuse
GreekAnalyst wrote:
Progress? Any Greek would be laughing by the article and let me say some FACTS, not Government Marketing Techiniques:

1. Well the Total Consecutive Deficit that Greece is around 30% (2009-2013), which a Guinness Record for an OECD country. Usually an economic “cycle” is also supposed to go “up”.
2. The unemployement has stabilized at 28% and rising slowly currently.
a. This ratio does not account approximately 10% more of unemployed due to its definition, e.g. compulsory military service Greeks and Greeks abroad are not accounted.
b. Almost All Greek with a sound university level from 18-30+ (60% of young Greeks have a Bachelor and 20% are MSc level) just leave the Country and seek an employement elsewhere. From my personal environment the percentage touches 90%, but I guess some decide to become a “lost generation”, no biggy!
c. The currently employed have switched contracts to fake “flexible” employment (e.g. 5 hours but stay for 8) and get paid 500 Euros (grossed with contributions of 150) so around 350. This contributes to a fake stabilization of the unemployement level.
3. Taxation is “unconstitutionaly” high, as per Greek Court of Justice, since e.g. within the Recession has risen approximately 150% (mixed) while salaries are just dropping at absurd levels. Also taxation on non Income criteria was accepted temporarily, due to the crisis, but its currently in the 3rd year, while it appears at the Tactical Income of the Greek Official Government Budget (the surpluses one!!!!)
4. The Greek Government has established a taxation system not based on “Income”, but on privately owned houses, land, fields, that their prices has lost approximately 50% since the start of the recession, but they are taxed at a “Defined value” which is set by the government and is higher than “Market Value”. This is officially admitted by the Government and its not “adjusted” since they said “they would loose Income” (see official statements by Mr Theoharis, Greek Responsible for taxation).
5. Within the Greek OFFICIAL BUDGET there is a line that sais “Expected Not Paid Taxes from Citizens” of approximately 600 millions, which is around 2-3% of Direct taxation expected Income. So its like admitting that OFFICIALY the taxation system cannot be burdened by an “immaterial” percentage of the population. Oh, its only around 330.000 Greeks, no issue!!!!

Jan 12, 2014 7:20pm EST  --  Report as abuse
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