* Newspaper says carries report from Finance Ministry
* Report says two-year deficit extension would aid economy
ATHENS, Aug 18 (Reuters) – Finance ministry officials in
Greece have calculated that the debt-stricken country’s economy
will recover faster and its debt be more sustainable if it is
given two more years to reduce its budget deficit, a Greek
newspaper reported on Saturday.
The estimate chimes with the view of Greek Prime Minister
Antonis Samaras who has tried, unsuccessfully, to win such an
extension in the past and is expected to refloat the proposal
next week with the leaders of France and Germany as well as with
Jean-Claude Juncker, the Eurogroup chief.
Under the terms of its European Union/International Monetary
Fund bailout, Greece is bound to implement painful austerity
measures to bring its budget deficit below 3 percent of GDP by
the end of 2014, from an expected 9.3 percent of GDP this year.
But with the country in its fifth consecutive year of
recession and social and political discontent rising, Samaras is
keen to soften the impact of budget cuts on society by extending
the deadline international lenders set it.
The latest estimate, reported by the Imerisia newspaper,
cited calculations by finance ministry officials it did not
name, saying they had worked out that a two-year extension would
help the economy shrink at a slower pace in 2013 and rebound
quicker from 2014.
Under such a scenario, the economy would shrink by 1.5
percent in 2013 and grow by 2 percent in 2014, the newspaper
said. If no extension was granted, the economy would contract by
up to 4.5 percent next year and not recover before 2015, it
said.
Greece’s ability to service its debt is seen by its
politicians as something that can only be facilitated by growth
as its lenders will only continue bankrolling it if it makes all
the necessary budget cuts and reform measures to reduce its debt
to 120 percent of GDP by 2020 from 165 percent in 2013.
But doubts are growing that Athens will hit those targets,
prompting calls from some European politicians and policymakers
to either eject Greece from the euro zone or to forgive it part
of its debts to help it keep the euro.
There is already a clause in Greece’s 130-billion-euro
($160.7 billion) bailout deal that says the deficit adjustment
period could be extended if its recession is deeper than
expected.
Greece’s economy contracted at an annual rate of 6.35
percent in the first half of this year, compared with an EU/IMF
forecast for a 4.7 percent contraction for the full year.
Samaras said last month that the economy would shrink by more
than 7 percent in 2012.
