The European Commission may change the Greek government΄s emergency financing program, based on the conclusions of an upcoming "sustainability review" of the country΄s debt level, EU economics commissioner Olli Rehn said in an interview Friday.
Greece has been enacting tough spending cuts and tax increases in exchange for getting approval for a EUR110 billion emergency financing package from the European Union and the International Monetary Fund last May. Yet investors have become increasingly worried that Greece will be unable to repay its large debt burden, which is expected to reach more than 150% of its gross domestic product this year, easily the highest level in the EU.
Yields on 10-year Greek bonds soared to over 13% this week, after German Finance Minister Wolfgang Schaeuble told a German newspaper that "further measures" would be needed if Greece΄s debt is deemed unsustainable.
The commission, the EU΄s executive arm, is conducting the review with the IMF and aims to complete it in late spring or early summer, Rehn told Dow Jones. This review is a normal part of the commission΄s quarterly economic assessments, but "this time it is of particular importance," Rehn said.
"We will look at all the factors that are relevant to debt sustainability, from economic growth, to tax revenue and an assessment of the impact of structural reforms," he said. "On that basis we will see whether and how the policy conditionality of the program should be adjusted," Rehn said, declining to provide further details.
Rehn stuck to his position that Greek debt restructuring risks disrupting the European financial system and shaking investor confidence in the debt of other euro-zone governments.
"Restructuring is not part of our plan," he said. "It΄s not in the cards."
The Greek government΄s reform process will be tougher this year than last, Rehn said. That΄s because numerous Greek ministries must get behind the government΄s plans to raise funds by selling off assets, which is the next phase of the Greek reform program.
"I can only encourage all the ministers of Greece to take the bull by the horns and deliver in their respective fields," Rehn said.
By Matthew Dalton
source: Dow Jones Newswires
