Greek PM rules out new austerity measures

Seasonally employed firemen protest outside the building were the Greek Prime Minister George Papandreou holds a press conference a day after his keynote speech on the economy By NICHOLAS PAPHITIS | AP Published: Sep 12, 2010 21:50 Updated: Sep 12, 2010 22:56 THESSALONIKI, Greece: The Greek government is planning no new austerity measures as part of efforts to pull the country out of debt, the prime minister said Sunday. George Papandreou said the government was on track to meet targets for reducing its deficit by nearly 40 percent this year. “We will not need any new measures,” he said during a news conference a day after making his annual speech on the economy on the sidelines of a trade fair in northern Greece, and reiterated that Greece did not plan to restructure its debt — a move that he said would have been “catastrophic” for the economy. In exchange for 110 billion euros ($140 billion) in rescue loans over three years from the International Monetary Fund and some EU countries, Greece has implemented strict fiscal control in an effort to reduce the budget deficit from 13.6 percent of annual output in 2009 to 8.1 percent this year. Unions have been angered, however, by austerity measures that have included cutting salaries and raising taxes. Asked whether Greece might ask for an extension of the EU-IMF package beyond its 2013 end date, Papandreou said the government did not intend to ask for an extension, and could even leave the program early if good progress was made. The year 2013 “is truly the end of this process,” Papandreou said. “The faster we complete the major reforms in our country ... the sooner we will be able to exit these restrictions. That could even happen before 2013, provided we do well.” The government’s main challenge now is to boost revenue, which is lagging behind targets, although the shortfall is offset by better than expected performance in spending cuts. According to the latest figures released by the Finance Ministry last week, net revenue increased 3.3 percent in the first eight months of the year, against a target of 13.7 percent for the year. However, spending fell by 12 percent from January to August, compared with an end-year target of 5.8 percent. Papandreou acknowledged that revenue shortfall was a problem, but said that overall “we are ahead of our targets.” “I have every confidence that, by the end of the year ... we will have achieved the 40 percent reduction of deficit,” he said. IMF and EU inspectors are due in Athens next week to review Greece’s progress in overhauling its economy, while the country is due to receive a second installment of loans worth 9 billion euros ($11.45 billion). Greece is relying on the loans to refinance its debt, as the interest rates demanded for its long-term government bonds on the international market are so high they have essentially locked the country out of the market. Investors are demanding about 9 percent more interest for Greek 10-year government bonds than they do for the equivalent German benchmark bonds. Papandreou said financial markets had reacted to Greece’s troubles in a “mob-like” manner in keeping the country’s borrowing costs so high, and that this showed the EU-IMF package was necessary to restore confidence in Greece’s economy. “I am confident that this confidence that is growing will have a strong impact on the markets” and therefore on bringing down borrowing costs, he said. On Saturday night, Papandreou gave a speech on the economy, promising to cut the tax rate on companies’ retained profits from 24 to 20 percent next year to offer “a strong incentive for investments and competitiveness.” He also pledged this year to open up restricted professions — including truck drivers, notaries, taxi drivers and pharmacists — deregulate the energy market, settle on privatization targets, facilitate major investments and simplify business licensing procedures. From Arab News