Log in
A+ A A-

Hardouvelis: Negotiation period extension may derail economy

A prolonged period of consultation and negotiation with our partners without any clear result and time of completion, and, if there were any maximalistic demands, not taking into account what the creditors' side could give or any unilateral actions, raises the risk of not only creating a funding problem for the country but of derailing the economy, Greek Finance Minister Gikas Hardouvelis said on Tuesday.

Addressing a debate organised by The Economist in Athens, Hardouvelis said any delay in agreeing with the country’s creditors could mean the loss of 7.2 billion euros from loans expected from the IMF and the eurozone, of which 1.8 billion euros were a grant – the return of profit made by the European Central Bank from its portfolio of Greek state bonds. 

 
“We must not leave any money on the table," Hardouvelis said, "It is a large sum. It almost covers the state’s pharmaceutical spending for one year... The loss of 7.2 billion euros would create a big problem in the operation of the state, as its borrowing requirements are heavy in the first quarter of 2015 and there is no flexibility in funding. The state has already borrowed the maximum allowed sum through T-bill auctions (15 billion euros) and access to capital markets is prohibited.”
 
Hardouvelis stressed that the European Central Bank will end its liquidity programme - which totalled 56 billion euros in December 2014 - to Greek banks as of March 1 and noted that Greek banks’ only option would be to resort to the Emergency Lending Assistance mechanism (ELA) of the Bank of Greece. This mechanism operates under the exclusive guarantee of the Greek state and has a higher cost, which would push domestic lending interest rates higher. 
 
Already, three out of the four systemic banks of the country have applied for participation in ELA, as they expect their liquidity needs to rise in the coming period because of the uncertainty related with political developments. “If the current (fiscal programme) review is not completed by February 28, an extension of the programme will be necessary. The sacrifices of the Greek people are significant and we must not let this effort go wasted”. The Greek minister added that “the country will determine together with its European partners the terms of an Enhanced Conditions Credit Line.”
Tagged under

News for

Tools

About Us

Follow Us