Greece Plans to Push for Promised Debt Relief in Talks

24/4/2014

By Nikos Chrysoloras and Rebecca Christie

Greece planned to press its case for further debt relief in a meeting of senior euro-area finance officials today, pushing its creditors to make good on their promise to act after its debt mountain rose to a record, two European officials said before the gathering in Brussels.

The Eurogroup Working Group, which prepares meetings of euro-zone finance ministers, already approved an aid payment of 6.3 billion euros ($8.7 billion), one of the officials said during the talks, asking not to be named because the discussions are private.

The government of Prime Minister Antonis Samaras has met the budget goal its euro-zone partners set as a condition for discussing further assistance, the European Commission confirmed yesterday. Greece recorded a primary budget surplus, which excludes interest and one-time payments, of 1.5 billion euros last year.

While finance ministers could kick-start discussions on easing Greece’s debt burden, which reached 175.1 percent of output in 2013, at their next meeting on May 5, commission spokesman Simon O’Connor said yesterday that the matter would probably not to be taken up until the second half of the year. Greece has already received 240 billion euros of aid pledges.
‘Growth Model’

Servicing Greece’s debt “would be unsustainable if the government were to pay market interest rates,” said Manolis Galenianos, a professor of economics at the University of London. “Therefore the most likely scenario is that Greece’s European partners will agree to a reduction of the debt burden in the near future through a lengthening of maturities and reduction in the interest rates.”

In today’s meeting, Greece planned to remind its currency-bloc partners of their November 2012 promise and argue that with the primary surplus confirmed, talks should begin sooner. It also intended to present outlines of a “new growth model” to revive an economy that has contracted for six straight years.

In this model, the role of the state will be limited and an emphasis will be placed on boosting exports, according to a draft growth report obtained by Bloomberg News.

“In order to be viable, the new model should be based on a gradual decline in the share of private and public consumption in GDP (stabilized or mildly increased in real terms), coupled with an increase in the share of private and public investment and, gradually, net exports -- especially given the fact that Greece has been, and still remains a relatively ‘closed’ economy,” the draft states.

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