Stournaras Repeats: No More Austerity

BRUSSELS – Even as international lenders keep pressing Greece to implement more reforms and have raised the likelihood of more austerity measures if a budget gap of as much as 2.9 billion euros ($3.89 billion) can’t be filled, Finance Minister Yannis Stournaras said that’s a red line that won’t be crossed.

“No austerity measures are needed. They are dangerous; we should let the automatic stabilizers work. We are willing to take structural measures with a fiscal impact, but not austerity measures,” Stournaras told CNBC.

“Greece has achieved tremendous progress up to now, people have made huge sacrifices, so we have to be very careful now what kind of measures we implement to close the fiscal gap, if any,” he added.

The Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) has been in tough negotiations with Stournaras but no agreement has been reached, delaying the release of a one billion euro ($1.37 billion) installment that is part of a second bailout of $173 billion that is keeping the economy from collapsing.

Prime Minister Antonis Samaras is keen to avoid implementing any more Draconian conditions after promising he wouldn’t, and to dampen prospects of more social unrest with Greeks remaining enraged the government has targeted workers, pensioners and the poor while letting the rich and tax cheats escape sacrifice.

Eurogroup President Jeroen Dijsselbloem said after a meeting of the bloc’s finance ministers in Brussels that Greece must urgently meet key commitments it has made to its international creditors in order to unlock the next installment.

That could take months as the two sides are far apart over the size of the hole in the 2014 budget: Greece insists it’s only 500 million euros ($672 million) and can be filled without resorting to more pay cuts, tax hikes and slashed pensions.

Stournaras said, “As an academic, this is not a precise exercise, so we are negotiating,” talking about the difference. “We have a draft budget with targets. What we’re trying to do is take the necessary structural measures to make these targets viable and credible,” he said. “Yesterday we gave Troika measures in the order of 0.7 percent of GDP, we think they are enough to close any fiscal gap, and make our budget credible.”

Discussing the stability of the Greek government – which survived a no-confidence vote this week – Stournaras said there is “absolutely no risk” for the ruling coalition. “We have covered 80 percent of the necessary fiscal adjustment. So the 20 percent that is remaining is very timely for the government to be threatened. We are clever people, now that we’re close to the end, we will not destroy what we have achieved so far,” he said.

The finance minister said his message to international investors would be that the economy is in a position where there is only upside. “What I can say now is that we have eliminated the causes of the crisis,” he said.

“The recession is much milder than we thought. For the first time in many years we are going to have a primary [budget] surplus, nobody expected it last year, not even me.”