Bank of
Greece governor Yannis Stournaras gave a stark warning about the risk of Greece
failing to reach an agreement with its creditors on a set of measures attached
to the country’s bailout as Prime Minister Alexis Tsipras reiterated his
government won’t succumb to “unreasonable” demands for additional pension cuts.
After months of brinkmanship which resulted
in the imposition of capital controls last summer, the government of Alexis
Tsipras signed a new bailout agreement with the euro area committing Greece to
economic overhauls and additional belt-tightening in exchange for emergency
loans of as much as 86 billion euros ($93.4 billion). Greece will implement the
agreement, Tsipras said in an interview with Real News newspaper published
Saturday, adding though, that creditors should be aware that the country “won’t
succumb to unreasonable and unfair demands” for more pension cuts.
Greece will reform its pension system, which
is on the “brink of collapse” through “equivalent” measures targeting proceeds
equal to 1 percent of the country’s gross domestic product in 2016, Tsipras
said. The proposals include raising mandatory employer contributions, according
to the country’s Labor Minister, George Katrougalos. Creditors oppose an
increase in compulsory contributions, as they argue these create a disincentive
for hiring workers and declaring incomes.
Negotiations with representatives of the
European Commission, the European Central Bank and the International Monetary
Fund will be “tough,” and the government is redoubling its efforts to find
“diplomatic” support, Katrougalos said in an interview with To Ethnos
newspaper, also published Saturday.
Stournaras warned, however, that escalating
discussions to a level of European Union leaders would be “exceptionally
dangerous,” at a time of open divisions within the bloc on issues ranging from
immigration to banking union. Stalling negotiations would deepen recession, and
lead to a tightening of restrictions in the movement of capital, according to
Stournaras, who is also a member of the Governing Council of the European
Central Bank. The government must implement the agreement that it negotiated
last summer and parliament must back it, Stournaras said, blaming the capital
shortfall of Greek lenders identified last year on the prolonged wrangling
between Tsipras and euro-area states.
In addition to pension reform, creditors
also asking Greece to implement more belt-tightening in order to meet an agreed
primary surplus target of 3.5 percent of GDP, excluding interest payments, by
2018. According to Greece’s finance minister Euclid Tsakalotos, the
International Monetary Fund isn’t convinced how the country will meet this
target. The IMF doubts the efficiency of some measures already adopted and is
more pessimistic on its assumptions about the Greek economy, Tsakalotos said in
an interview also published Saturday in Kathimerini.
Greece has covered 75 percent of the fiscal
consolidation required to make its debt sustainable, Stournaras said. If it
wasn’t for the “backtracking” of the first half of 2015, 85 percent of the
distance would have been covered by now, according to Stournaras, who also
served as Finance Minister in the previous conservative government led by
Antonis Samaras. “Today, a new backtracking is unthinkable,” he said.
Πηγή:
bloomberg.com
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