IIF Chief Dallara Says Greece Needs More Time

Greece should get cheaper rates on its pending second bailout, for $172 billion, and at least two more years from its international lenders to repay them, the chief negotiator for the country’s private sector creditors said.
Charles Dallara, Managing Director of Institute of International Finance (IIF) made his remarks during a news conference while on a trip to Beijing. Earlier this year he represented banks in talks with then Finance Minister Evangelos Venizelos, who imposed 74 percent losses on them.
But Dallara – as have virtually all other officials with an interest in helping Greece get out from under a crushing economic crisis – said better terms could only come after the government delivers on commitments it has made to fiscal reform.
“Once that has been done, and I am confident it will be done, Europe and the IMF should move quickly to extend the adjustment period for at least two years and provide the modest additional financial support for that extension to be effective, ” Dallara said, referring to the Troika of the European Union-International Monetary Fund-European Central Bank that is putting up $325 billion in two bailouts.
Dallara said an extension wouldn’t be costly. “Only some 15-20 billion euros ($19.5-$26.1 billion) is needed. This can easily be realized in part by reducing interest rates on the loans which Europe and the IMF made to Greece on more concessional terms,” he continued, adding that responses to the Greek debt crisis placed too much emphasis on short-term austerity and not enough on improving the country’s longer-term competitiveness.
Dallara welcomed the ECB’s commitment this month to launch a potentially unlimited bond-buying program to lower the borrowing costs of struggling Eurozone countries in a bid to end the debt crisis, but said it was at risk of failure. “The announcement by the ECB was very bold on the one hand, but it will come to naught, nothing, unless Spain or Italy ask for EU/IMF endorsement of an economic program,” Dallara said.
“In the absence of a governmental negotiation of a reform program that is endorsed by the European Commission, the massive potential support by the ECB will remain just potential and will not materialize,” he said.
Greek Prime Minister Antonis Samaras is ready to make another $14.6 billion in cuts aimed primarily at workers, pensioners and the poor but said those conditions, applied for a first bailout of $152 billion, have worsened the country’s deep recession and he wanted two more years to meet fiscal targets, although he stopped short of asking for it. The austerity measures have already in strikes and protests in motion and more are planned as social unrest is rising.
Athens, where Europe’s debt crisis began nearly three years ago, has been boosted by a decision to give Portugal – also the recipient of an international loan package – more time to meet fiscal targets as recession saps Lisbon’s ability to deliver. Under the revised targets, Portugal has until 2014 to bring its budget deficit down to the EU limit of 3 percent, ministers said. Previously, the 78 billion euro package required a deficit of 3 percent in 2013. Greece is trying to reduce its deficit from 9.3 to 3 percent, the ceiling set by the Eurozone of the 17 countries using the euro.
Troika inspectors are evaluating Greek progress on agreed targets before releasing the last installment, some $38.8 billion, from the first rescue package. IMF Managing Director Christine Lagarde said last week that lenders may agree to some sort of extension but Austrian Finance Minister Maria Fekter said that Greece should get only “a few more weeks” to meet terms of its international rescue. The idea of having a year or two was dead and no extra money was on the table, she said.
Greece’s second loan deal envisages Athens returning to international markets by 2015, but with two consecutive Parliamentary elections in May and June after political parties struggled to form a coalition, the country lost ground on its reform agenda. Deepening recession has also made the debt targets less attainable.
(Sources: Reuters, Kathimerini)