Greece should be able to exit its international bailout ahead of schedule and cover its own financing needs from next year, Greek Prime Minister Antonis Samaras said on Tuesday (23 September) after talks with German Chancellor Angela Merkel.
The comments were the first time Athens has said publicly that it hopes to do without aid payments next year. That would pave the way for the IMF – deeply unpopular in Greece – to quit supervising the country’s reform program.
“We need to become a normal country, and we’ve proven that we are reliable and we can stand on our own feet,” he told a news conference with Merkel, who hailed the “first tender shoots of success” in Greece, thanks to painful economic reforms.
Funding from the eurozone ends in December 2014 and IMF aid expires in the first quarter of 2016. That has raised questions on whether a European country should be left to the IMF’s sole supervision without any EU involvement.
Greece and the IMF “have a cooperation that was never easy, quite the contrary, but that has certainly changed the face of our economy,” Samaras said. “I believe this cooperation will be completed ahead of schedule. If that happens, it would be a success, not a divorce.”
Forced to impose unpopular reforms at the behest of lenders and leading a shaky right-left coalition, Samaras is hoping that an early end to the bailout and the austerity measures that come along with it will help him regain political momentum.
Samaras’s conservatives were roundly defeated in the EU elections in May by the radical leftist Syriza party. Syriza remains well ahead in opinion polls, with early elections possible next year, when a crucial presidential vote is held.
Greece successfully returned to the debt markets this year and government finances have improved significantly. Athens is now expecting to reach agreement on additional debt relief late this year, which it hopes will be Greece’s final step towards funding itself without outside help.
“I believe that we can certainly cover our funding needs from next year,” Samaras said. “We will see what happens with the next bailout tranches.”
Kostas Boukas, head of asset management at Athens-based Beta Securities, said, “It’s evident from what Samaras said that the Europeans and the Greek government want the IMF to exit the program. They don’t want the IMF to continue supervising the reform programme for Greece, a euro zone country.”
Merkel put Greece’s success down to its persistence with the type of structural reforms Germany has insisted on – which have made her a hate figure in Greek anti-austerity protests.
That discontent came to the fore once again on Tuesday when Greek public-sector workers staged the first nationwide strike after the summer to protest job cuts prescribed by the international lenders.
During a six-year recession, unemployment has risen to around 27%, twice the eurozone average. Tuesday’s strike by teachers, doctors and municipal workers shut down state schools, hospitals operated on emergency staff, and trolley-bus services were briefly disrupted.
The €240 billion package from the EU and IMF has kept Greece afloat since the second half of 2010. It nearly crashed out of the eurozone two years ago but has now brought its public finances under control.
Still, investors fear Athens’s determination to exit the bailout could hurt its prospects for debt relief. Greek ten-year yields rose 17 basis points to 6.08%, their highest in over a month.
“The fact that Greece could try to rely on market financing could postpone a lasting solution (to its debt) that still needs to be found,” said Daniel Lenz, a fixed-income strategist at DZ Bank in London. The larger the share provided by market funding, the higher the risk for private investors, he said.
Merkel’s talks with Samaras coincided with the second day of a visit by French Prime Minister Manuel Valls, who wants more time to bring France’s public deficit to within EU treaty limits.
Paris acknowledged this month that its deficit would not be below the EU limit of 3% of national output until 2017. It had pledged to do so by 2013, before winning a reprieve until 2015.
France is being urged by the EU and European Central Bank to step up reforms and budget consolidation at the same time as Germany is being asked to boost public investment as part of a strategy to revive a stagnant eurozone economy
Greece, with a debt-to-GDP ratio of around 175% of GDP, has been bailed out twice since 2010 by other eurozone governments and the International Monetary Fund (IMF) after being cut off from markets because of unsustainable public finances.
Officials from the IMF, the Commission and the European Central Bank, called the Troika, review every three months Greece's progress in putting its finances in order and reforming its economy in exchange for the loans, which are disbursed in tranches.
- December 2014: EU aid to Greece expires