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German finance minister says no more risks of contagion in euro zone

11/23/2013 | 12:23pm EDT
Germany's Finance Minister Schaeuble delivers his speech at European Banking Congress in Frankfurt

BERLIN (Reuters) - German Finance Minister Wolfgang Schaeuble said on Saturday that there were no longer any risks of contagion in the euro zone, and Greek Prime Minister Antonis Samaras stressed his country did not need a further bailout.

Schaeuble said Greece's achievements in the last 1-1/2 years, which included better-than-expected growth and progress in reducing its deficit, merited respect. He also pointed to the decline in the difference between yields on German and Greek bonds.

He said government crises and coalition negotiations no longer posed contagion risks for the single currency bloc as a whole, without specifying which country or countries he was referring to.

"The euro is stable, financial markets are no longer concerned about the future of the euro zone and there are no risks of contagion anymore," he said at a conference organized by German newspaper Sueddeutsche Zeitung in Berlin.

Speaking later at the event, Greece's Samaras reiterated that his country did not need a further bailout and instead simply needed to fulfill the terms of its existing program.

Athens has said it will emerge from a six-year recession next year and has more than doubled its forecast for the budget surplus before interest payments for this year.

International lenders are in the middle of their latest review of Greece's performance on its reform targets. Posting a budget surplus before interest payments would open the way for Greece to ask for debt relief.

"I think that this is enough. We don't need something else - we don't need another program - we just have to stick by this program," Samaras said.

After more than two months of reviewing Greece's economy, the lenders have still not agreed to release Greece's next tranche of bailout funds as they disagree with Athens on the size of a fiscal gap for 2014-2015 and how this will be filled.

Officials from the "troika" of lenders - the European Commission, the European Central Bank and the International Monetary Fund - are due to return to the country in early December.

"I believe that what we need at this point is to finish the job by the end of the year of getting, that is, the approval of the troika for the next tranche," Samaras said.

The prime minister stressed that Greece did not need more time to reduce its debt. "At this point I'm going very fast ... I do not need time to wait," he said.

Athens faces bond payments of 1.85 billion euros ($2.5 billion) in early January.

Greece said earlier this week it will post a primary budget surplus before interest payments, of 0.4 percent of GDP this year.

But under the terms of its international bailout it must widen the surplus to 4.5 percent of GDP in 2016. Athens has said it will meet this target without taking further unpopular austerity measures, helped by an economic recovery and better tax collection.

But the troika insists the country must make further cuts because it doubts the degree to which an economic rebound and a crack down on tax evasion can improve Greece's finances.


IMF's mission chief for Greece suggested on Saturday that there is room for compromise, since both Athens and its lenders agreed that across-the-board measures which would hurt the country's economy should be avoided.

"Further measures will be needed for 2014-2016 but they will be on a much smaller scale than in the past," the IMF's mission chief for Greece Poul Thomsen was quoted as saying in an interview with newspaper Kathimerini.

"We agree with the (Greek) government there should be no across-the-board measures and that they should focus on areas of waste," Thomsen said.

"Across-the-board" fiscal measures are generally understood to be fiscal measures that indiscriminately affect the entire population, like tax increases or public sector pay and pension cuts.

Speaking on Friday in a joint press conference with German Chancellor Angela Merkel, Samaras reiterated that there would be no new wage and pension cuts in austerity-weary Greece.

Greece and its lenders have yet to settle many outstanding issues, Thomsen said, including the 2014 budget, Greece's 2014-2017 mid-term fiscal strategy and a new property tax.

The troika was also pushing Greece to soften current restrictions on large-scale corporate firings, as well as on bank foreclosures of first homes, Thomsen told Kathimerini.

(Additional reporting by Angeliki Koutantou)

By Michelle Martin

© Reuters 2013
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