One year after being bailed out with 110 billion euros in EU and International Monetary Fund loans, Greece is insisting that any restructuring of its debts would be a disaster for its economy.
The financial markets however continue to believe the Greeks will eventually have to admit they cannot fully repay what they have borrowed.
Greece has already got concessions on delays in paying back that bailout money and reduction in the rate of interest, but full restructuring would involve investors who bought government bonds not getting all the money they are owed.
As EU and IMF inspectors arrived in Athens on Tuesday for a quarterly review of the government’s latest austerity plans, Finance Minister George Papaconstantinou said a restructuring would be “a huge mistake” affecting the Greek economy for years to come. He said such a move would make it impossible for Greece to borrow on the markets for 10 or 15 years.
The government insists that with further spending cuts it can slash its budget deficit from 15.4 percent of GDP in 2009 to 7.4 percent this year.
The financial markets do not have much confidence in Greece’s ability to repay what it has already borrowed and to continue to be able to borrow more.
However the finance minister said his country’s economy will start to grow again next year after a three-year recession. He based that on double-digit growth in exports in the last five months and forecasts that the tourism sector will do well this year.