ATHENS (Reuters) - Greece’s prime minister said in an interview that the possibility of extending repayment of its EU/IMF loan was on the table, but an ECB policymaker said any talk of renegotiation could harm the country’s credibility.
Greece has cut public wages and pensions and raised taxes to help plug its budget shortfall as part of a 110 billion euro EU/IMF bailout that saved it from bankruptcy in May.
But officials say it will miss this year’s deficit target because of a revision of 2009 fiscal data and weak revenue growth, and the government has said it is ready to make extra spending cuts if necessary.
“The issue of extending the repayment of the support mechanism loan has already been put on the table,” Prime Minister George Papandreou said in an interview to be published by the Greek newspaper Proto Thema on Sunday.
“But this does not mean that the problem is automatically solved. The deficit is a deficit and the problems are ours, not anyone else’s, with or without the (EU/IMF) memorandum,” he said.
Analysts have said Greece is likely to need additional help eventually because of a jump in 2014/2015 gross borrowing needs when the 3-year bailout deal expires.
The International Monetary Fund has also said extending repayments is an option, but last month Germany strongly opposed it and the European Commission said no talks were taking place.
European Central Bank Executive Board member Lorenzo Bini Smaghi said in an interview with the Greek daily Kathimerini that the deeply indebted country must focus on reining in its deficit.
“Greece has to achieve its objectives in order to regain credibility. We must now focus on 2011,” Bini Smaghi said.
“Other discussions, such as the renegotiation of loan terms, now only harm your credibility,” he said in the interview to be published on Sunday, without saying what discussion he was referring to.
Bini Smaghi urged Greece to continue cutting spending, and Papandreou said there was room for further belt-tightening in the public sector. “We have cut operating expenses by 50 percent. But there is still a lot of waste,” Papandreou said. “We are not discussing lay-offs.”
A senior government official said earlier that Greece would seek extra spending cuts worth about two percent of GDP when it presented the final draft of its 2011 budget on November 18.
In the first draft of next year’s budget, GDP was seen at around 232 billion euros ($316 billion), meaning cuts of 2 percent would amount to around 4.6 billion euros.
The official said the health and labor ministries would contribute the bulk of the effort, about 2 to 2.5 billion euros.
Another government official told Reuters this week that Greece was set to miss its target of reducing its budget deficit to 7.8 percent of GDP this year.
The Greek government, which won a wafer-thin victory in the first round of local elections last weekend, may find it hard to impose more belt-tightening on a population which has already endured a swathe of unpopular reforms in the past year.
The second round of the elections takes place on Sunday.
IMF, EU and European Central Bank officials start a visit to Athens on November 15 to monitor fiscal progress.
Reporting by Angeliki Koutantou and Ingrid Melander; Additional reporting by Sakari Suoninen in Frankfurt; editing by Tim Pearce
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