August 9, 2013 / 11:50 AM / 4 years ago

Greece says it needs budget surplus, growth to return to bond markets

ATHENS (Reuters) - Greece must achieve economic growth and a budget surplus excluding interest payments before it can return to bond markets and will meet both conditions next year, finance minister Yannis Stournaras said on Friday.

Ministers of Energy for Greece, Cyprus and Israel (L-R) Yannis Maniatis, Yiorgos Lakkotrypis and Silvan Shalom attend the signing of a memorandum of understanding in Nicosia, Cyprus Thursday August 8, 2013. REUTERS/Andreas Manolis.

By then, Greeks will have endured a six-year recession that has shrunk the economy dramatically. Excluded from financial markets since 2010, Greece has been kept afloat and inside the euro zone only by a 240 billion euro EU/IMF bailout.

A returning to borrowing in markets could help Athens plug a financing shortfall currently estimated at about 10 billion euros in the 2014-2015 period.

“I have set two conditions for Greece to access (bond) markets. The first is a primary surplus and the second one is a return to growth,” Stournaras told Greek private Mega TV.

Figures on Friday showing industrial production rose 0.4 percent June compared with the same month last year - the second monthly expansion this year - confirmed the economy may be crawling towards a recovery.

Petroleum products and pharmaceuticals drove a 4.2 percent jump in manufacturing production - the biggest manufacturing expansion since May 2008, just as Greece’s recession began, according to central bank figures.

“This is undoubtedly a positive sign that the recession in industrial production may be bottoming out,” said Platon Monokroussos, an Athens-based economist with Eurobank. “Yet we need to watch for more positive signs going forward to make sure that a recovery trend has been established.”

The European Union and International Monetary Fund estimate the Greek economy will expand by 0.6 percent next year, after a crippling, austerity-fuelled contraction that has wiped out almost a quarter of gross domestic product since 2008.

Greece will publish second quarter GDP figures on Monday.

OPTIMISTIC ON THE BUDGET

Stournaras was optimistic that Athens will beat current fiscal targets to achieve a primary budget surplus in 2013. That would allow it to seek further debt relief from its euro zone partners as early as spring 2014.

“I believe we will make it,” he said in the interview.

Athens has beat interim budget targets so far this year, cutting public investment to offset a tax revenue shortfall caused by record unemployment, a wave of corporate bankruptcies and rampant tax evasion.

But lenders remain skeptical and expect a balanced primary budget this year. Large uncertainties about the 2013 fiscal outcome persist, they said last month, especially as Greek firms and citizens have yet to pay the bulk of this year’s taxes.

Stournaras on Friday also urged the euro zone to adopt a banking union and a common debt market to overcome its problems. His call may anger the bloc’s paymaster Germany, which opposes joint euro zone bonds.

His comments came a day after U.S. President Barack Obama appeared to back Greek claims that the country needs economic growth rather than austerity to cope with its debt problems.

“... in dealing with the challenges that Greece faces, we cannot simply look to austerity as a strategy,” Obama said after meeting Greek Prime Minister Antonis Samaras on Thursday.

“It’s important that we have a plan for fiscal consolidation to manage the debt, but it’s also important that growth and jobs are a focus.”

Additional reporting by George Georgiopoulos; Editing by Catherine Evans

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