Greece’s Prime Minister George Papandreou and senior European Central Bank officials have said that the country should focus on privatization and budget cuts to overcome its debt crisis rather than trying to restructure its debt.
Majority of Greeks are against further spending cuts and according to a poll result published on Saturday, for the first time since 2009 the ruling socialists are losing their majority against the conservative opponents.
However, Papandreou must present a fiscal consolidation plan next week good enough to ensure that the EU and the International Monetary Fund (IMF) keep funding the debt-laden country.
In an interview to Ethnos newspaper on Sunday, the Prime Minister said: “Debt restructuring is not under discussion”.
Greece, currently in the first year of an €110 billion bailout package, is in the middle of deep recession and weak revenue growth has not helped matters either, giving rise to speculations that its need to restructure its debt to get out of the messy situation.
Jean-Claude Juncker, the chairman of the 17 member Eurogroup had said on Tuesday that Greece may have to move to “soft restructuring” to prop up its struggling economy. The ECB has strongly opposed the move fearing it may destabilize the Euro.
Ewald Nowotny, a member of ECB governing council in an interview to Greek newspaper Vima on Saturday said: “For the ECB, the line is one and clear: you have to implement the commitments you have made”.
Juergen Stark – a member of ECB executive board in a separate interview to newspaper Kathimerini said: “We are at a critical juncture, what it really takes now is action”.
Ratings agency Fitch on Friday warned that any kind of debt-restructuring by Greece will be interpreted as sovereign default, some thing the EU members specifically wish to avoid.
Any debt restructuring will hamper the country’s return to the bond markets and will serious hit its credibility to carry out reforms.