Reuters — Greece’s European partners should grant the country debt relief and lower its primary surplus targets, Greece’s central bank chief and former Fin Min Yannis Stournaras wrote in the Financial Times.
Stournaras said Greece had made significant fiscal progress, the government had honoured its commitments and “current market interest rates are very favourable to debt relief decisions for both borrower and lenders”.
“European partners have yet to deliver on their commitment to provide further debt relief,” Stournaras, also a former finance minister said, according to a copy of his article in the paper made available by the central bank on Monday.
Athens and its international lenders wrapped up a crucial bailout review last month which is expected to unlock vital funds that the country needs to pay maturing ECB bonds, IMF loans and increasing state arrears.
Greece’s lenders promised debt relief in November 2012 and although the country achieved a primary surplus of 1.5 billion euros in 2013 “it never happened”, Stournaras said. He said euro zone finance ministers in May again postponed a decision on substantial debt relief to 2018.
“It is now time to strike the right balance between reforms and relief,” Stournaras said, reiterating that Greece’s 2018 primary surplus target should be lowered to 2 percent from the current 3.5 percent of GDP.
Such a move would give Athens fiscal room to reduce taxes and attract investors, which would help boost growth, he said.
He said that scenarios explored at the Bank of Greece showed that debt sustainability would be achievable with such a target, if combined with “a rather moderate debt relief that does not inflict losses on lenders”.
“Now Greece needs a new deal with its partners and lenders in order to move forward. It is unrealistic, and socially unattainable, to demand that Greece achieve a general government primary surplus of 3.5 percent of GDP from 2018 and beyond,” he said.
