ATHENS (Reuters) - Greece’s new government will focus on reviving its recession-hit economy without missing targets under a foreign bailout, a deputy finance minister said on Tuesday, in a bid to assuage concerns it would renege on commitments to its lenders.
Athens wants to take advantage of a shift in Europe towards more growth-oriented measures by tweaking the mix of measures in the 130-billion-euro rescue, but would not try to change overall fiscal targets in the plan, Christos Staikouras said.
“The climate is becoming more favorable to changes and adjustments provided we meet our commitments and work towards implementing targets,” Staikouras, one of two deputy finance ministers, told a conference.
“The government can make changes, as long as these are in line with the targets of the program.”
Prime Minister Antonis Samaras’s conservative-led government took office less than two weeks ago but has already outlined a wishlist of changes to the bailout - including an additional two years to eliminate the primary deficit.
The main opposition party SYRIZA, which only narrowly lost elections last month, wants to tear up the bailout deal.
Greece’s foreign lenders - the EU, European Central Bank and International Monetary Fund - have warned there is little room for maneuver. They begin a review this week of Greece’s faltering progress in fiscal adjustment and reforms after weeks of political paralysis during elections in May and June.
The government has argued that a different policy mix is required due to a deeper than expected recession in Greece which makes cutting debt even harder.
Staikouras quoted a study by the KEPE think-tank predicting the Greek economy would contract by 6.7 percent this year, well above a Bank of Greece forecast for a 5 percent contraction in 2012.
“We have underlined that it is necessary to apply additional policies to reverse rising unemployment, contain recession and help the economy recover,” Staikouras said.
“A basic aim is the economy’s macro-economic adjustment towards smaller twin deficits.”
He added that the government would also try to pay out arrears of about 6.5 billion euros ($8.2 billion) to suppliers this year. Near-bankrupt Greece has held off on paying suppliers to avoid running out of money.
The comments came after the head of a special EU taskforce in Greece told the same conference that the government must prioritize paying out those arrears to get funds flowing again to cash-strapped businesses.
“It would be very difficult to really improve the situation of the Greek economy even with these reforms if the very difficult situation of access to finance is not tackled,” Horst Reichenbach said. “The first step is to pay the arrears that have accumulated.”
Arrears to suppliers in industries ranging from pharmaceuticals to construction rose to 6.8 billion euros in the five months to May, according to data released by the finance ministry late on Tuesday.
Standing in for Samaras, who is recovering from eye surgery on June 23, Development Minister Kostis Hatzidakis told the conference Greece would earn the support of euro zone partners fast losing patience with a litany of broken promises and missed targets.
“With the new tax system and by tackling tax evasion, by simplifying the business environment and speeding up privatization, Greece will show that it is taking steps,” said Hatzidakis. “It will come as a pleasant surprise”. ($1 = 0.7947 euros)
Additional reporting by Renee Maltezou, Harry Papachristou and Karolina Tagaris; editing by Ron Askew