German and Dutch finance ministers Wolfgang Schäuble and Jan Kees de Jager responded unfavorably on Tuesday to Greek prime minister Antonis Samaras’ request for an easing of his country’s bailout conditions.
Giving Greece more time to reach its budget targets “is not a solution to the problem,” Schäuble told Südwestrundfunk radio. He added, “More time means more money.”
De Jager took a similar line, saying, “If it concerns delaying reforms and budget cuts, then it is not a good idea.”
Samaras insisted on Wednesday during a joint press conference with Luxembourg’s prime minister Jean-Claude Juncker, who heads the group of eurozone finance ministers, that Greece does not require more money. “All we want is a little room to breathe, to get the economy going and to increase government revenues. More time does not automatically mean more money.”
However, European officials estimate that a two year delay in Greece’s austerity program will cost an additional €20 billion.
On the same day, the Greek Finance Ministry announced that its deficit reduction effort is ahead of schedule. While tax revenues fell €2.8 billion short of the target that had been set for the January-July period, the deficit reached €13.2 instead of an anticipated €14.8 billion.
Greece’s coalition government has committed to an additional €11.5 billion in spending reductions between 2013 and 2014. Among the austerity measures are layoffs of contractors in the public sector, a cap on pensions, cuts in welfare benefits, reductions in tax exemptions and lower salaries for government workers.
Structural entitlement and labor market reforms that should enhance Greek competitiveness in the medium to long term remain stalled. A comprehensive privatization effort has yet to be initiated. Business confidence is fading. More than one out of five Greek workers is unemployed. Youth unemployment has topped 50 percent.
The Balkan nation received €110 billion in financial assistance in 2010 and was promised a second bailout worth €130 billion in February. More than half of Greece’s €350 billion debt was subject to “haircuts” at the time. Banks and private investors were forced to write off billions in Greek bonds.
Samaras, the leader of Greece’s conservative party who was elected prime minister in June, has called for a two year respite in his country’s fiscal targets. Under the current agreement, he should reduce the government shortfall to 2.1 percent of gross domestic product in 2014.
Juncker said Wednesday that no decision would be taken on the Greek situation until the next assessment of European and International Monetary Fund inspectors is released in October, a view that was echoed by Chancellor Angela Merkel in Berlin.