ATHENS (MNI) – Greece’s Finance Minister George Papaconstantinou
reiterated over the weekend that restructuring Greek public debt “is
still not an option for the government.”

In an interview with Greek daily To Vima, Papaconstantinou said
that if Greece were to take such a step it would be tantamount to a
declaration by the government that it could not repay its creditors,
which he said would put the country in a difficult position for a
decade.

“The banking system would stop operating completely and businesses
and households would not be able to draw funds from it,” he warned. “We
would enter into a much deeper recession — of 10%, maybe more, from
which [the country] would take years to exit,” Papaconstantinou told the
newspaper.

Asked whether he believed there could be a spillover of the crisis
to other EMU countries because of delays [in announcing the release of
aid to Greece], he replied, “indeed, such danger exists. A different
handling of the crisis in Europe could have prevented certain things.”

He once again defended the austerity measures the government has
agreed to implement in exchange for financial aid from fellow Eurozone
states and the IMF, and he acknowledged that some of the measures such
as pension cuts were socially unjust. “If the program succeeds and we
reduce the deficit sooner than expected we could renegotiate
differently,” he added.

“I don’t mean as regards the indirect taxes, but [we could] make
some corrective moves as regards the income,” he said.

However, Papaconstantinou declined to precommit to reinstating
rights that have now been abolished, because the situation that will
emerge at the end of the austerity program will be “a totally new
environment.”

Asked why the Greek people should accept the harsh measures, the
finance minister replied: “When you ask for a loan of 110 billion euros,
you negotiate the terms but the room for maneuver is limited. Of course
it is not fair for the pensioner to pay the price. But our main concern
is to avoid the country’s bankruptcy.”

He said that the borrowing needs of Greece for this year “exceed 50
billion euros” and that the country owes 300 billion euros in total.

Papaconstantinou added that during the negotiations, the European
Commission, ECB and the IMF proposed the abolition of the 13 and 14th
months’ paychecks and pensions in the public sector, and that in the end
the government managed to keep a bonus of around 1,000 euros per year
for the low income workers and retirees.

During the past few days there have been widespread reports in the
Greek media that the EMU partners and IMF never proposed that the 13th
and 14th payments be abolished, and that it was a political trick by the
government to make it look as if it had salvaged something from the
negotiating table — by securing the E1,000 bonuses — when it fact the
government itself had proposed cutting the extra two months of
paychecks.

The government has also been heavily criticized for new taxation on
businesses of just 1 billion while pension cuts will amount to E3
billion over the next four years. Papaconstantinou said the pension
system would have gone bankrupt without the changes.

Asked whether the austerity measures might put the country deeper
into recession, the minister responded: “Was there an alternative? Those
who say there was the option of fewer measures forget that we wouldn’t
be able to borrow.”

Papaconstantinou predicted that the private sector would not remain
untouched by the salary cuts in the public sector and that there would
be “some containment” of pay.

“I believe there are already renegotiations, and businesses are
trying to contain salaries as much as they can in order to avoid
layoffs,” he said.

–Angelika Papamiltiadou, +306-937-100071; a_papamiltiadou@hotmail.com

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