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Europe

Greek Central Bank rules out debt restructuring

Text by News Wires

Latest update : 2011-04-18

Bank of Greece Governor George Provopoulos (pictured right) said on Monday that debt restructuring is "neither necessary nor desirable" as it could limit government and business access to international credit markets.

AFP - A Greek debt restructuring is "neither necessary nor desirable," the head of the central bank said Monday as he called for faster structural reforms to keep up with the country's obligations.

"Such an option is neither necessary nor desirable," Bank of Greece governor George Provopoulos said in his annual report on the Greek economy.

"It is not necessary because we can meet our goals if we apply policies correctly. It is not desirable because it would have disastrous consequences on the access of the government and of businesses to international credit markets," Provopoulos said.

The central banker, a member of the board of the European Central Bank, said the recession-hit Greek economy was "on the edge" as structural reforms were still slow in relation to the country's rapidly-growing debt.

Greece's debt has exploded to 340 billion euros ($490 billion) and speculation is rife that the recession-hit eurozone member will seek a way to ease its repayments under a restructuring before long.

But the Socialist government has repeatedly insisted that such a move would damage the country's efforts to repair investor confidence which has been strained ever since a scare over the accuracy of its fiscal statistics in 2009.

A former Greek prime minister who oversaw the country's eurozone accession a decade ago added his voice Sunday to calls to roll over Athens' crushing debt.

"A well-prepared restructuring will essentially improve our position," Costas Simitis said in an interview with To Vima weekly.

"The longer it delays, the greater the debt that cannot be restructured," the 74-year-old law professor argued.

Greece has already secured a repayment extension on its 110-billion-euro ($159-billion) bailout loan secured from the EU and the International Monetary Fund last year.

To help out, Athens' eurozone partners last month agreed to cut the cost for its EU-IMF bailout package by a full percentage point and extend its maturity to 7-1/2 years from three years.

But according to a number of reports, Greek Finance Minister George Papaconstantinou last week broached the idea of extending the repayment period on the country's entire debt at a Eurogroup finance ministers meeting in Hungary.

"We are not discussing anything," the minister insisted this weekend.

"We are not discussing something regarding (Greek debt to) the private sector," he told reporters on the sidelines of the IMF and World Bank annual spring meetings in Washington.

Greece's economy is caught in a tailspin as it labours to enforce a draconian austerity programme mandated by the EU and IMF in return for last year's bailout.

Provopoulos forecast Monday that the recession will drag on this year, with output falling at least three percent, "without excluding a somewhat greater drop," he noted.

Unemployment -- which has soared to levels unseen in a decade -- will exceed 15 percent, the central banker said. Inflation will fall compared to last year but will still be close to 3.25 percent, Provopoulos said.
 

Date created : 2011-04-18

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