Greece will present on Friday fresh austerity and privatisation plans in an attempt to convince markets it can tidy up its finances and avoid restructuring its debt.
Failure to agree substantial reforms could hurt the debt-choked country even further at a time when it is already taking a beating on markets on growing talk it may have to ask bond investors to accept changes such as smaller or later payments. "The measures which we will announce will send a message to markets: Greece now has credibility, a plan and a prospect which guarantee that we will meet our targets," government spokesman Yiorgos Petalotis told Reuters, denying debt restructuring plans.
The government is expected to announce sell-offs, benefit cuts and effective tax hikes to save about 23 billion euros to bring its budget deficit to about 1 percent in 2015 from about 10 percent in 2010, officials said. Two-thirds of this would come from spending cuts and one third from revenues.
To comply with the EU/IMF bailout that saved it from bankruptcy last year, it must also spell out how it intends to raise 50 billion euros from privatisations by 2015, a target which many analysts and Greek politicians see as optimistic.
The government is expected to present at a cabinet meeting on Friday morning broad outlines of its fiscal and privatisation programmes and flesh them out before they are submitted to parliament in May.
The adoption of the plans was scheduled before increased speculation about restructuring, an unexpected upwards revision of its 2010 deficit and below-target revenues in January and February put additional pressure on Greece. Greek unemployment also hit a new record of 15.1 percent in January.
The premium investors demand to hold Greek government bonds rather than benchmark German Bunds topped 1,000 bps on Thursday for the first time since May 2010 when Athens got a 110 billion euro EU/IMF bailout.
Greek bank shares fell over 5 percent on Thursday on restructuring fears but the government spokesman reiterated this was not an option.
"We are sticking to our targets and we are not examining other options, such as restructuring. We rule out any such scenario," Petalotis (photo) told Reuters.
Analysts said the additional measures were necessary for Greece to meet its targets but would do little to ease restructuring concerns in the short term.
"Failure to agree on the new fiscal plans and potential disappointment on the privatisations front could hurt Greek bonds even further," said Ioannis Sokos, at BNP Paribas. "While the upside can be seen only in the medium- to long-term horizon, the downside can be imminent."
source: Reuters
