Greek Debt Grows as Samaras Looks to Creditors for Relief

Prime Minister Antonis Samaras said in an interview last week, “We expect by the year 2015 that we will have not simply primary surplus, but that we’re going to have a fiscal surplus.”.

Πηγή: Bloomberg
By Ian Wishart
April 23 2014

Greek state debt surged to a euro-era record last year, underscoring the urgency of Prime Minister Antonis Samaras’s push to lower the cost of the government’s bailout loans.

The country’s debt pile reached 175.1 percent of gross domestic product in 2013, up from 157.2 percent a year earlier, the EU’s statistics office in Luxembourg said today. For the euro zone as a whole, state debt rose to a record 92.6 percent of GDP from 90.7 percent.

“The surge in public indebtedness since Greece’s fiscal crisis erupted in 2009 is staggering,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London. “The fact that, technically speaking, it’s still debatable whether Greece is solvent says much about the management of its crisis.”

While Greece has the highest debt-to-GDP ratio in the 18-nation single-currency bloc, Samaras may get some welcome news later today, when the European Commission decides if his government posted a primary budget surplus in 2013.

Greece’s euro-area partners said in November 2012 that when the government in Athens registers a primary surplus, which excludes borrowing costs, they will “consider further measures and assistance” to help Greece meet the targets set out in its rescue-aid agreement, which foresees a debt-to-GDP ratio “substantially lower” than 110 percent in 2022.

Two-Party Coalition

The euro pared gains against the dollar after today’s data were released, trading at $1.3842 at 11:21 a.m. in Brussels, up 0.3 percent on the day. The Stoxx Europe 600 Index was down 0.3 percent to 336.15.

Seeking to bolster a shaky two-party coalition government, Samaras is keen to obtain a political reward for his cost-cutting measures before European legislative elections next month. His government has already said it achieved a primary surplus of 2.9 billion euros ($4 billion) last year, a figure that must be confirmed by the commission.

Today’s debt data came in below the European Commission’s forecast for 2013 of 177.3 percent of GDP.

While euro-area finance ministers could kick-start discussions on debt relief for Greece at their next meeting on May 5, Dutch Finance Minister Jeroen Dijsselbloem, who leads such gatherings, has said the matter will not be taken up until after the summer.

Bank Aid

Greece’s headline deficit widened to 12.7 percent of GDP in 2013 from 8.9 percent in 2012, today’s data showed. This includes a one-time cost for recapitalization of the country’s banks. Without that added expense this year, the European Commission predicts the deficit will narrow to 2.2 percent of GDP in 2014.

“We expect by the year 2015 that we will have not simply primary surplus, but that we’re going to have a fiscal surplus,” Samaras said in an interview last week. “This means we will be able on our own to pay our debt, without borrowing at all. There are very few European countries that are doing this today.”

Greece went through the world’s biggest sovereign-debt restructuring and has so far received 240 billion euros in aid commitments. To receive payments, the country has faced a series of economic conditions including labor-market reforms and budget goals.

In recent weeks, Greece’s recovery has gained momentum. The government held its first bond sale in four years earlier this month and forecasts it will emerge from a six-year recession this year after six years of contraction.

Economic Recovery

Today’s data also confirmed that other fragile euro-area economies are still struggling to control debt levels even as recovery across the currency region takes hold. Italy’s debt mountain increased and remained as the second highest in the euro area after Greece, going up to 132.6 percent of GDP in 2013 from 127 percent the previous year.

Portugal, in third place, saw its debt rise to 129 percent of GDP from 124.1 percent, while in Ireland, next in line, debt rose to 123.7 percent from 117.4 percent. Both countries received international bailouts at the height of the euro crisis.

The data also show that some euro-area countries are struggling to reduce their budget deficits to with the EU’s 3 percent of GDP limit. France, the region’s second-biggest economy, posted a deficit of 4.3 percent, down from 4.9 percent. Spain recorded a deficit of 7.1 percent last year, narrowing from 10.6 percent the year before.