Greece says wrapping up bailout review will help it beat growth forecasts

ATHENS (Reuters) - The conclusion of Greece’s second bailout review will help the country outperform a downwardly revised EU forecast for 2.1 percent growth this year, a government spokesman said on Thursday.

FILE PHOTO: A woman waves a Greek flag in front of parliament during a protest against the government's austerity measures in Athens May 3, 2010. REUTERS/John Kolesidis/File photo

After six months of wrangling, Greece reached a deal with its foreign lenders last week on reforms and spending cuts it needs to implement in the coming years, paving the way for the conclusion of a key bailout review.

But the delays have already hurt economic activity in the crisis-hit country. The European Commission on Thursday cut its growth forecast for Greece to 2.1 percent from 2.7 percent this year.

“Once the review is concluded... I strongly believe that we will outperform the Commission’s forecasts”, government spokesman Dimitris Tzanakopoulos told reporters, adding the delays would not derail Greece’s fiscal efforts.

Greece will achieve a primary surplus - which excludes debt servicing costs - of 2 percent of GDP this year, versus a 1.75 percent target, Tzanakopoulos said.

The government hopes that legislating the new measures by May 18 will allow euro zone finance ministers to approve the deal when they meet on May 22, as talks between Greece’s lenders on granting the country further debt relief continue.

These steps will help unlock vital bailout loans.

Top euro zone and International Monetary Fund officials will discuss debt relief for Greece on Friday, on the sidelines of a meeting of G7 finance ministers and central bankers in the Italian city of Bari, officials said.


Tzanakopoulos said that there was progress in debt talks. But there is no deal yet on Greece’s primary surplus targets for the decade after its 86-billion euro bailout, the third rescue package since 2010, expires in 2018.

Greece’s debt stands at 179 percent of gross domestic product. The lenders want Greece to maintain a 3.5 percent of GDP primary surplus for up to four years, according to draft documents seen by Reuters.

Debt sustainability is key for the IMF, which has yet to announce if it will contribute funds to the EU-funded bailout. Under discussion is its participation for one year, in 2018, with a small amount of loans.

Athens wants to conclude the review of its bailout progress to qualify for inclusion in the European Central Bank’s quantitative easing program and return to bond markets after three years of isolation. The government’s term ends in 2019.

Tzanakopoulos said there was no clear timetable but the government intended to “take advantage of the positive momentum to make a trial market exit as soon as possible”.

Greece’s central bank governor called on foreign lenders to specify debt relief measures as soon as possible and lower its primary surplus targets after 2020 to help it qualify for inclusion in the ECB’s asset-buying program and support economic recovery.

Addressing industrialists in northern Greece, Yannis Stournaras said that budget primary surplus targets should be maintained at 3.5 percent up to 2020 and be lowered to 2 percent of GDP after that period.

Reporting by Angeliki Koutantou and Renee Maltezou, Editing by Mark Trevelyan