Greece hails 'turn in the tide' but debt problems loom

GMT 10:59 2015 Thursday ,26 February

Arab Today, arab today Greece hails 'turn in the tide' but debt problems loom

Greek Finance Minister Yanis Varoufakis
Athens - AFP

Greece's finance minister hailed Thursday a "turn in the tide" following an extension of the stricken eurozone country's bailout but warned of problems ahead in meeting billions of euros in debt repayments.
Finance Minister Yanis Varoufakis told Bloomberg TV in an interview that 700 million euros ($795 million) was deposited at Greek banks on Tuesday, when Greece's creditors approved the four-month extension.
That is a fraction of the 20 billion euros withdrawn in panic since early December when elections were called and the eurozone's most indebted country lurched into a new crisis, according to estimates reported by Bloomberg.
But Varoufakis, 53, a dapper economics professor with excellent English tapped by Greece's new anti-austerity Prime Minister Alexis Tsipras to cut Athens some financial slack, said it was a start.
"There was a deposit flight back into the Greek banking sector," Varoufakis told Bloomberg. "It's a question of direction. Once you turn the tide, you hope."
The extension to Greece's 240-billion-euro lifeline -- averting a possible euro exit -- still needs approval from the Greek and German parliaments, but this should be a formality despite unease among some lawmakers.
To secure the breathing space, Tsipras's new hard-left government, elected last month, published a list of proposed reforms focused on tackling tax evasion and corruption and greater government efficiencies.
But Tsipras, 40, had to temper promises to hike the minimum wage, reinstate laid-off civil servants and alleviate poverty by vowing that this would be done only in consultation with Greece's creditors.
- Doubts in Deutschland -
But Greece, which has been in almost constant crisis mode since 2010 fighting to stay in the single currency zone and whose economy has shrunk by a quarter in six years, is by no means out of the woods.
German Chancellor Angela Merkel, whose country has stumped up more money than any other for Greece, said Wednesday that the extension was just a "starting point" and that Berlin was under "no illusions" about the challenges ahead.
Her Finance Minister Wolfgang Schaeuble went further, saying that there was a "lot of doubt in Germany" about whether Athens will stick to the commitments made in return for its two bailouts in 2010 and 2012.
"The question now is whether one can believe the assurances of the Greek government or not," Schaeuble said.
The International Monetary Fund and the European Central Bank, which together with the European Commission hold most of Greece's 320 billion euros ($365 billion) in debts, have also expressed misgivings.
Over the coming four months Greece needs to firm up its reform plans and show by the end of April that they are bearing fruit before receiving a final bailout disbursement of 7.2 billion euros.
In the meantime Greece has to repay several billion euros' worth of maturing debts, including some two billion euros to the IMF in March and April and 6.7 billion euros in ECB bonds maturing in July and August.
In 2015 Greece has to pay back around 19 billion euros.
"We are going to have problems repaying IMF debts and the ECB in July," Varoufakis told Alpha Radio, denying however that this would give the government liquidity problems.
In the Bloomberg interview, Varoufakis suggested that the ECB could settle Greece's debts with the IMF using around two billion euros in bond profits that he said was owed to Athens.
"This is money we are owed," he said. "I find it very hard to imagine that Europe and the IMF will allow us to trip over what is a relatively small cash problem."
It is unclear whether this could happen, however, and the same goes for Greek hopes to issue more short-term bonds known as T-bills.
Assuming Greece can scrape through the coming months, Tsipras wants to hammer out with Greece's creditors a new reform programme and renegotiate the country's debt pile, which accounts for around 175 percent of national output.
Whether this takes the form of another writedown -- like the previous 100-billion-euro "haircut" -- remains to be seen, with Germany's finance ministry saying Wednesday any such discussion is "misplaced and incomprehensible".
"There is a mountain to climb in agreeing how to make Greece's long-term debt position sustainable," said economist Jennifer McKeown at Capital Economics.

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