Greek Finance Minister Yiannis Stournaras said the government has saved the country from its crushing economic crisis and that a deep recession, now in its sixth year, will end and recovery will begin next year, a prediction at odds with many analysts who believe it will take the country years to pull itself out from under crushing debt and be able to repay $325 billion in international loans.
The country’s economic downturn started in 2008 but speaking to the BBC’s correspondent in Athens, Stournaras said Greeks had reason to be optimistic, despite record unemployment and devastating austerity measures that have put 20 percent of them into poverty.
“I feel sure, 100 percent certain that this will be the last year of Greece’s recession,” he said. “Towards the last quarter of 2013, we are going to have recovery.” He said reforms – including more of the pay cuts, tax hikes and slashed pensions he also acknowledged had been too harsh – as well as 74 percent losses imposed on investors by a previous government to reduce the country’s debt, and a debt buyback late last year – had secured the country’s economic future.
“The probability of Greece leaving the euro – Grexit – is now very small,” he told the BBC. “We have managed to turn the economy around. From the markets, there΄s much more optimism. Deposits are coming back to banks, the government is paying its arrears to the private sector and there is a change in how Europe sees us. So all the leading indicators are positive. We are two-thirds of the way towards our target. So people can have hope.”
He said that the bad times are coming to an end, predicting growth next year, even if the economy contracts in 2013 by an estimated 4.5%. Greece’s debt currently stands at around 180% of Gross Domestic Product (GDP) this year, and the goal is to reduce it to 124% by 2020, but the International Monetary Fund, one of Greece’s lenders, said that seems unlikely to be met without more assistance.
“I would welcome a reduction of the level of debt – but there are many ways to achieve that,” he said, without indicating whether Greece would seek another debt write-down. “Itt should happen in a way that minizises the loss to other parties,” he said. Prime Minister Antonis Samaras has reneged on a vow to hold harmless small bondholders, including those in the Diaspora, some of whom lost their life savings in a bid to support Greece.
But while Greece is tired of austerity, northern Europe is tired of bailing out Greece. German taxpayers feel they have shouldered the burden and so any further debt restructuring may be delayed by domestic European politics, at least until the Bundestag elections in September. But Stournaras was confident that it will come. He reiterated Samaras’ promise not to impose more austerity either.
“If we implement this year΄s reform program, there will be no more austerity packagesk” he said, referring to a $17.45 billion spending cut and tax hike plan pushed through Parliament along with upcoming privatizations and other measures to reduce spending and go after tax evaders. “No more cuts to wages, benefits and pensions,” he said, a promise many Greeks believe can’t be kept.
“Greece was forced to cut too far, too fast”, he explained. “In hindsight, we should have placed more emphasis on structural reform and privatizations at the start. But we can΄t go back. There΄s no point crying over spilt milk. The Eurozone was not prepared for the crisis.”
He also acknowledged that Greeks feel much injustice and that the rich, politicians and tax evaders have largely escaped sacrifice while the government has continued to hammer workers, pensioners and the poor who have no choice but to pay and can’t hide their income in secret foreign bank accounts.
“I΄m convinced there was no other way. Without this bailout money, Greece would be outside the Eurozone. And that would spell disaster,” he said, referring to an income series of $69 billion in rescue monies as part of a second bailout of $173 billion from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB).