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21May11
Greek PM, ECB officials reject debt restructuring
Greece must avoid debt restructuring and push on with budget cuts and privatisations to overcome its debt crisis, the country's Prime Minister George Papandreou and senior ECB officials said on Saturday.
Papandreou must present a fiscal plan next week that is credible enough for the European Union and the International Monetary Fund to continue bankrolling his debt-laden country.
But a large majority of Greeks reject more austerity, according to a poll published on Saturday, which also shows the ruling socialists losing their lead versus the conservative opposition for the first time since their 2009 election victory.
"Debt restructuring is not under discussion," Papandreou said in an interview in Sunday newspaper Ethnos.
One year into its EU/IMF 110-billion euro bailout, Greece is struggling with weak revenues and deep recession, fuelling speculation that it will have to restructure its debt to pull itself out of the fiscal mess that triggered a euro zone crisis.
The chairman of the 17-country Eurogroup Jean-Claude Juncker said on Tuesday Greece may have to move toward a "soft restructuring" of its debt.
But the European Central Bank remains strongly opposed to such a move, due to fears that it would destabilise the euro.
Greece has no other option but to follow through its fiscal plan, ECB governing council member Ewald Nowotny told Greek newspaper To Vima on Saturday. "For the ECB, the line is one and clear: you have to implement the commitments you have made."
In a separate interview in newspaper Kathimerini, ECB executive board member Juergen Stark said any kind of debt restructuring would thwart the country's return to bond markets and undermine reforms. "We are at a critical juncture, what it really takes now is action," Stark said.
On Friday, Fitch became the second major ratings agency to warn that it would consider any kind of debt restructuring as a sovereign default -- exactly the kind of outcome euro zone governments are trying to avoid.
Asked by Ethnos if he would consider a debt "reprofiling" rather than a restructuring, Papandreou said: "We are looking after our job... We do not join the public discussion about such scenarios."
Limits of Austerity, Privatisations
Greece is considering deeper cuts in public sector wages and further tax increases on a range of products and professions to qualify for more aid, Greek newspapers said on Saturday.
The plan may include scrapping bonuses to civil servants and employees in state-run companies, newspapers Ta Nea and Isotimia reported, without citing any sources.
The government may also lower or scrap tax-free thresholds on property holdings and the self-employed, raise consumption taxes on soft drinks and certain fuel types or shift a range of products to a higher VAT-bracket, other newspapers said.
Papandreou vowed on Saturday to take any measure necessary to secure more funding for his country. "Greece must convince everyone of its determination," he said.
But a large majority of Greeks say they cannot take more austerity as the country enters its third year of recession.
Eighty percent of respondents told pollster MRB they refused to make any further sacrifices to get more EU/IMF aid, an MRB poll for paper Realnews showed.
The same poll shows Papandreou's ruling Socialist PASOK neck-and-neck with the opposition conservatives, with both parties scoring 21.5 percent each. In the previous MRB poll in April, PASOK had an 1.8 point-lead.
But Papandreou warned that any failure to push through the plan might lead the country straight to default. "At the moment, it does not seem as if Greece can cover its 2012 borrowing needs... from the market," he said in the interview.
Papandreou pledged to speed up a 50 billion euro privatisation programme, a key part of efforts to shore up finances without a debt restructuring. However, he reiterated that the state would keep stakes in firms managing vital public goods and services, such as water and electricity utilities.
In an interview with German magazine Der Spiegel, Juncker urged Greece to set up a trustee institution to help privatize state assets, similar to the body that privatised East German companies after the fall of communism.
"Henceforth, the European Union will escort Greece's privatisation programme as if we were conducting it ourselves," he said.
[Source: By Harry Papachristou, Reuters, Athens, 21May11]
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