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Restructure of Greek debt would be counterproductive in long term: experts
Date: 2010/11/26 Click: 1942
Restructuring of the Greek debt would be counterproductive in the long term, but a debt repayment extension is a possibility, experts said Tuesday.

Poul Thomsen, chief International Monetary Fund (IMF) representative in Greece, said that the extension of the repayment period of European Union (EU) and IMF loans to Athens is an option.

Regarding the restructure of the Greek debt, Thomsen stressed that the short-term benefit would be lower than the cost Greece will face eventually.

"The main issue is that Greek economy remains competitive inside the eurozone," Thomsen said.

The IMF representative also called on Athens to make an extra effort in 2011 to fulfil all targets set by the Stability and Growth Program to exit Greece's debt crisis.

The program remains broadly on track. But in order to tackle remaining challenges, Athens must continue on the path of structural reforms, the troika delegation stressed during a press conference to discuss the second progress report on the Greek economy done by EU, IMF and European Central Bank experts.

Servaas Deroose, deputy director general of the European Commission, noted that the outlook for the Greek economy is positive and is expected to begin turning around in 2011. As wage and price inflation moderates, the next step will be to boost competitiveness, Deroose said.

Based on the experts' report to EU-IMF officials in the following days, Greece will be granted the next 9 billion euro (12.2 billion U.S. dollars) tranche of a 110-billion-euro (149.1 billion dollars) aid package agreed to in May so that the eurozone member country avoids default and can exit the crisis over a three-year period.

Thomsen added that additional measures should be implemented in the following months so that the program remains on track.

Pointing to a shortfall in revenue collections, Thomsen stressed that new measures to broaden tax bases and eliminate wasteful disbursement in health spending, state enterprises and tax administration should be stepped up.

According to the latest data released by the Greek Finance Ministry, the budget deficit for January to October fell 30.2 percent on an annual basis, missing the 33.2 percent draft budget target due to weak revenues.

Asked about scenarios of mass dismissals of employees in state-run companies in the coming months, troika officials referred the issue to the Greek government, noting that there is rule of hiring one new employee for each five retiring.

Denis Blenck, a senior advisor for the ECB, said that so far, the program has effectively supported stability through guarantees of bank bonds, despite ongoing pressures. The capital is adequate and the newly established Financial Stability Fund is available to provide more support if deemed necessary.
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