Greece rejects calls to extend austerity past 2018 | Business| Economy and finance news from a German perspective | DW | 06.12.2016
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Greece rejects calls to extend austerity past 2018

One day after eurozone approval of short-term debt relief measures, Greece rejected any pressure to extend its austerity program beyond 2018 as part of a deal to bridge differences between its international creditors.

Greece welcomed the eurozone's offer of short-term debt relief on Tuesday, but urged Germany and the International Monetary Fund (IMF) to abandon their demands for harsher austerity once its bailout program expired in 2018.

Athens was "determined to pursue negotiations" still ongoing with eurozone countries and the IMF but "refuses to accept measures concerning post-2018," spokesman Dimitris Tzanakopoulos said Tuesday.

Greece signed up to more economic reforms and austerity measures as part of an 86-billion-euro ($92-billion) bailout last year. It wants to wrap up the latest review to qualify for inclusion in the European Central Bank's quantitative easing (QE) program in the first quarter of 2017, which would set the stage for Greece to return to bond markets. 

While short-term debt relief measures to be applied before 2018 would help Greece, a European Central Bank (ECB) source said the bank could not include Greek bonds in its asset-buying program without more clarity on Greece's debt sustainability.

The comments come a day after eurozone lenders approved "short-term" debt relief measures for Greece, in reward for Athens' completion of a recent round of budgetary and economic reforms.

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The Greek pressure cooker

But eurozone ministers left open for how long after 2018 they wanted Greece to maintain a higher primary fiscal surplus of 3.5 percent, a factor considered crucial by the IMF.

A surplus at that level implies a heavier tax burden and perhaps more pension cuts for households.

The IMF has previously said that with the current set of reforms agreed with Athens, Greece will only reach a primary surplus of 1.5 percent of GDP in 2018, and therefore the eurozone should grant Athens more relief or demand deeper cost cutting.

Tzanakopoulos said the IMF had pushed for Greece to adopt extra austerity measures and accused the Fund of "a big contradiction" in its stance. Both the IMF and Germany needed to play a "constructive" role, he said.

"They must stop insisting on continuing a policy of extreme austerity which has been proven destructive for society and has also been economically ineffective," Tzanakopoulos said. 

He said talks on reducing the targeted primary surpluses must continue. "These must be lowered to give the Greek economy a chance to breathe," he said. 

Debt reduction by 2060

According to Klaus Regling, the head of the European Stability Mechanism, the body that releases the bailout funds to Greece, Monday's package of measures will reduce Greece's debt burden by 20 percentage points by 2060.

Though conceding there was a large amount of uncertainty given the timescale involved, Regling said the benefits to Greece were "clear" and would help make Greek debt sustainable.

However, the eurozone finance ministers gathered in Brussels refused to officially sign off on the bailout's second review, telling Athens there were still a few open questions on Greece's reform efforts.

Already huge, Greece's debt after three consecutive bailouts is on course to reach a mammoth 315 billion euros, or around 180 percent of gross domestic product this year, according to the latest EU data.

Tzanakopoulos said Athens still hoped to complete the second review "if possible by the end of the year", and called on German Finance Minister Wolfgang Schäuble and the IMF to "play a constructive role" by "ceasing to insist on extreme austerity which is catastrophic from a social standpoint and inefficient economically."

tko/hg (AFP, Reuters, dpa)


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