ATHENS (Reuters) - Greece will not restructure its debt and will not need more cuts to achieve fiscal targets set in the emergency funding programme it agreed with the European Union and the IMF, its finance minister told a Sunday paper.
The debt-laden country has been offered a 110 billion euro ($134 billion) bailout to avoid defaulting on its debt and in return promised to cut the deficit by 11 percentage points of GDP and bring it below the EU’s cap of 3 percent by 2013.
Markets fear the drastic belt-tightening to secure the deal may plunge the economy into deeper recession and threaten its meeting fiscal targets, prolonging the country’s debt crisis.
“Greece will not need additional measures, especially ‘painful’ measures. I see only one option ahead, delivering on our targets with consistency,” Finance Minister George Papaconstantinou told Sunday’s Eleftherotypia newspaper.
Greece’s economy, which makes up about 2.5 percent of the euro zone, is expected to stay in recession for a second year in 2010 after a 2 percent slump in 2009.
The Bank of Greece projects the economic downturn will deepen, with GDP seen contracting by 4 percent this year, as tax increases and cuts in wages and pensions take a toll.
“The recession will be deepest in 2010 and thereafter there will be a gradual recovery,” the minister told the paper. “I remain optimistic and believe we will recover fast.”
The minister reiterated the socialist government’s stance that debt restructuring was not an option, now or in the future.
“Debt restructuring would be disastrous for the country’s credibility. It would lead to its marginalization from capital markets, to even more belt-tightening and a very deep recession,” he said.
He said Greece could rely on the EU/IMF programme for its funding needs without having to return to markets for borrowing before the first quarter of 2012.
“The government has shown it is not counting political cost when it comes to what needs to be done for the good of the country,” Papaconstantinou told the paper.
Reporting by George Georgiopoulos; Editing by Louise Ireland