Greece entered a last round of reform talks with creditors Monday, just five months before the country’s massive rescue program ends — and with the government and central bank publicly disagreeing on how to finance the nation after the bailout.
Government officials said the talks with representatives of Greece’s European partners and the International Monetary Fund in Athens would cover privatizations and energy.
But the negotiations were upstaged by a continued spat between Greece’s central bank governor, Yannis Stournaras, and the government over financing policies after the bailout runs out in August. The country will then have to raise money from international investors in bond markets — at a much higher rate than bailout creditors charge.
Stournaras repeated his argument that the government should consider setting up a precautionary credit line from the bailout rescuers that would secure the country — and its banks — cheap funding if needed, particularly as the country’s bonds are still rated well below investment grade. The finance ministry countered that this would create market jitters as to Greece’s ability to finance itself.
“Regardless of intentions, (Stournaras’) position … creates objective doubts regarding the prospects of the Greek economy, increases uncertainty and impedes Greece’s smooth exit from the bailout,” said Franciscos Koutentakis, the ministry’s general secretary for fiscal policy.
Greece signed the first of its three multi-billion euro bailouts in 2010, after it admitted its budget deficit was much higher than initially reported and investors stopped buying Greek bonds.
To secure the funds that kept it solvent, the country has slashed spending and public sector incomes, hiked taxes and extensively reformed its economy.
But the measures worsened a recession that wiped out more than a quarter of the economy and sent unemployment spiraling up by 16 percentage points between 2008 and 2016. The third bailout runs out in August.
Over the past eight months, the country has raised money from bond markets on three occasions through issues that were amply oversubscribed but offered high interest rates to attract investors.
Stournaras argued Monday that the possibility of an official credit line, to be used if needed, “should not be dramatized”, as it would lower borrowing costs and “offer security as to state and bank access to financing after the end of the bailout.”
He also warned that the economy would remain under supervision from its European creditors until 75 percent of its debts have been repaid. Presenting the Bank of Greece’s annual report for 2017, Stournaras said economic growth is expected to accelerate to 2.4 percent this year, mostly on the wings of higher tourism receipts and exports.
Also Monday, some 2,000 municipal employees marched through central Athens to protest planned changes in school policy that unions say would threaten jobs in municipally-run kindergartens. Minor scuffles with police broke out outside parliament, but no arrests or injuries were reported.