Greek Finance Minister Promises to Speed Debt Cutting (Update1)
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By Natalie Weeks and Maria Petrakis
Dec. 12 (Bloomberg) -- Greek Finance Minister George Papaconstantinou promised to speed up fiscal and budget reforms to overhaul the economy, saying the country has no time to spare after investor concerns sent bonds and stocks tumbling.
“The biggest gamble the government has is how to regain credibility,” Papaconstantinou said in a speech in Athens today. “The initiatives will be faster and more dynamic. We don’t have the luxury to wait. We will speed up everything, we owe it to the citizens of Greece.”
Greek bonds plunged to their lowest in seven months on Dec. 9 and stocks slumped after Fitch Ratings cut Greece one step to BBB+, saying Prime Minister George Papandreou’s two-month-old Pasok government isn’t doing enough to tame a deficit of 12.7 percent of output, the highest in the European Union. A day earlier, Standard & Poor’s put its A- rating on watch for downgrade.
European Central Bank Vice President Lucas Papademos today characterized Greece’s fiscal situation as “extremely serious,” in comments to reporters in Berlin.
“Greece should take decisive action and in a timely manner,” Papademos said.
Papaconstantinou said the government will begin talks next week on crafting a new tax system that will be fairer and more effective. An audit of government spending will begin next year with the assistance of international companies, he said.
Debt
The year will close with 300 billion euros ($438.5 billion) in debt and “we must stop the rising dynamic of it,” Papaconstantinou said. The stability plan the government will submit in January needs to include a plan for the “gradual reduction” of Greece’s debt, he said.
Nobel laureate Robert Mundell said in an interview with Bloomberg Television in Berlin today that a debt default by Greeece “would send shockwaves through the system.” He predicted the country would “handle the problem by itself,” although neighboring economies may eventually provide resources.
“This is a good occasion to set up a fund which is available for bailout, a kind of security fund,” he said. “Even if it won’t be used, there might be other occasions to come up at some point in the future.”
ECB President Jean-Claude Trichet said yesterday that “courageous” action is needed to close the budget gap. Greece’s 2010 budget projects the deficit will be reduced to 9.1 percent of gross domestic product.
To contact the reporter on this story: Natalie Weeks in Athens nweeks2@bloomberg.net; Maria Petrakis in Athens on mpetrakis@bloomberg.net
Last Updated: December 12, 2009 13:57 EST
