Greece's new finance minister: some economic reform efforts off-track

ATHENS, Greece – Greece is falling short of some of the commitments it has made in return for billions of euros of rescue money, the country’s new finance minister admitted Thursday after meeting representatives of the country’s financial rescuers for the first time.

After months of political turmoil that led to a hiatus in the implementation of reforms as Greece struggled through two inconclusive elections, the country’s international debt inspectors from the European Central Bank, European Commission and International Monetary Fund have returned to Athens for the first time in over three months to inspect the status of the debt-ridden country’s finances.

“The pre-election period was long,” Yannis Stournaras said as he officially took over the ministry after his first meeting with the inspectors, collectively known as the troika. “Some parts of the program are off track and some are on track.”

Greece endured two national elections in May and June, neither of which left a party with enough of a majority to form a government on its own. A coalition government comprising the first-place conservatives, their traditional rivals, the socialists, and a small left-wing party was formed after June 17 elections.

The new government, led by Prime Minister Antonis Samaras, has said it will seek to persuade the country’s rescue creditors to ease some of the strict terms of its bailout.

“These are difficult times and I am assuming the position at the most difficult time for the Greek economy,” Stournaras said as he took over from the caretaker minister, Giorgos Zanias. “We are heading straight into deep water.”

Promising “hard work,” Stournaras noted that “the years ahead are difficult. I do see light at the end of the tunnel, but the tunnel is long.”

Greece has had to impose harsh austerity measures, including big cuts to pensions and salaries, to secure billions of euros worth of rescue loans from the IMF and other European countries that use the euro and avoid bankruptcy.

But the reforms have contributed to an increase in the country’s unemployment rate to over 22 per cent and left the country mired in a fifth year of recession. The hardship led voters furious with mainstream politicians’ handing of the crisis to abandon the traditionally dominant parties in droves in favour of smaller anti-bailout parties advocating Greece renege on its bailout conditions.

Since its last visit in late March, the troika has returned to meet with the new government and explore the financial situation. The IMF’s Poul Thomsen, the ECB’s Klaus Masuch and the European Commission’s Matthias Mors are meeting with Stournaras and Samaras.

Samaras told them that his government “is determined to move ahead more effectively with the fiscal adjustment, to speed up structural reforms so that the economy recovers, jobs are created and social cohesion is ensured,” his office said in a statement.

The troika heads’ visit was also delayed by about a week after Samaras was forced to stay home for several days to recuperate from serious eye surgery carried out just after the election, and his designated finance minister was hospitalized and later turned down the post for health reasons.

Ahead of the government’s policy statement, which Samaras is to present in Parliament Friday evening, the governing coalition has said it advocates easing some terms of the bailout agreement, including freezing public sector layoffs and repealing some of the tax hikes imposed over the past two years.

But whether Greece can revise the terms of its two bailouts, worth a total of €240 billion ($300 billion), will depend on how the proposals are viewed by its creditors. Germany, the largest single contributor to the bailouts, has repeatedly said that Athens must stick to its commitments.

Other European countries have also voiced strong concern about Greece.

In an interview with Swedish Radio Thursday, Sweden’s Finance Minister Anders Borg said that unless Greece changes its ways, the country is headed for bankruptcy.

“The way the situation has been handled so far — and with the high debt levels they have — it can’t be ruled out that it will all finally end in a bankruptcy.”

He also said the country might have to consider exiting the eurozone — which his own country is not a member of.

“I’m more unsure about that, but it is obvious that if you have such a high debt, you only have grim alternatives to choose between,” he said.

Greece’s financial woes exploded onto the international scene in late 2009 after the newly elected PASOK government at the time said the previous conservative administration had falsified financial data and that the deficit was far higher than thought.


Derek Gatopoulos in Athens and Louise Nordstrom in Stockholm contributed.